documents Telenor’s strong position in the Norwegian ... · Notes to the financial statements – Telenor Group 80 Accounts – Telenor ASA 120 ... MMS: Multimedia Messaging Service;

The Annual Report 2002 documents Telenor’s strong

position in the Norwegian market, an enhanced capacity

to deliver in the Nordic market and a developed position

as an international mobile communications company.

With its modern communications solutions, Telenor

simplifies daily life for more than 15 million customers.

TELENORTelenor – internationalisation and growth 2

Positioned for growth – Interview with

CEO Jon Fredrik Baksaas 6

Telenor in 2002 8

THE ANNUAL REPORTDirectors’ Report 2002 10

Telenor’s Corporate Governance 18

Telenor’s Board of Directors 20

Telenor’s Group Management 22

VISION 24

OPERATIONSActivities and value creation 34

Telenor Mobile 38

Telenor Networks 42

Telenor Plus 44

Telenor Business Solutions 46

Other activities 48

FINANCIAL REVIEW

Operating and financial review and prospects 50

Financial Statements

Statement of profit and loss – Telenor Group 72

Balance sheet – Telenor Group 73

Cash flow statement – Telenor Group 74

Equity – Telenor Group 75

Accounting principles – Telenor Group 76

Notes to the financial statements – Telenor Group 80

Accounts – Telenor ASA 120

Auditor’s report 13 1

Statement from the corporate assembly of Telenor 13 1

SHAREHOLDER INFORMATIONShareholder information 134

2002 2001 2000 1999 1998

MOBILE COMMUNICATION

Norway

Mobile subscriptions (NMT + GSM) (000s) 2,382 2,307 2,199 1,950 1,552GSM subscriptions (000s) 2,330 2,237 2,056 1,735 1,260– of which prepaid (000s) 1,115 1,027 911 732 316Revenue per GSM subscription per month (ARPU)1) 346 340 338 341 366Traffic minutes per GSM subscription per month (AMPU) 180 181 173 169 167Market share GSM (service provider) 61.1% 60.9% 66.4% - -Customer churn - mobile subscriptions 17.5% 12.5% 12.7% 14.2% 13.1%Pannon GSM (Hungary)

GSM subscriptions (000s) 2,450 - - - -– of which prepaid (000s) 1,910 - - - -Revenue per GSM subscription per month (ARPU)1) 180 - - - -Traffic minutes per GSM subscription per month (AMPU) 113 - - - -Market share GSM 38% - - - -DiGi.Com (Malaysia)

GSM subscriptions (000s) 1,616 1,039 - - -– of which prepaid (000s) 1,519 902Revenue per GSM subscription per month (ARPU)1) 152 180 - - -Traffic minutes per GSM subscription per month (AMPU) 189 211 - - -Market share GSM 19% 17% - - -Kyivstar GSM (Ukraine)

GSM subscriptions (000s) 1,856 - - - -– of which prepaid (000s) 1,472 - - - -Revenue per GSM subscription per month (ARPU)1) 107 - - - -Traffic minutes per GSM subscription per month (AMPU) 49 - - - -Market share GSM 50% - - - -GrameenPhone (Bangladesh)

GSM subscriptions (000s) 769 464 191 61 30– of which prepaid (000s) 563 279 49 6 -Revenue per GSM subscription per month (ARPU)1) 172 190 260 - -Traffic minutes per GSM subscription per month (AMPU) 298 316 356 - -Market share GSM 69% 70% 69% - -

FIXED LINE IN NORWAY

PSTN subscriptions (000s) 1,467 1,545 1,680 1,908 2,167ISDN subscriptions (lines) (000s) 1,828 1,766 1,590 1,228 755PSTN/ISDN generated traffic (minutes in millions) 15,527 17,960 19,560 18,704 16,610Fixed line market share of traffic minutes (including Internet) 72.2% 73.2% 73.2% 87.3% 96.4%Operator access lines (000s) 49 12 - - -

INTERNET IN NORWAY

Internet subscriptions residential market (000s) 960 831 625 400 260– of which Frisurf (000s) 533 437 248 45 -– of which ADSL (000s) 90 23 - - -Internet subscriptions business market Norway (000s) 17 16 13 8 4– of which ADSL (000s) 4 1 - - -ADSL-lines wholesale market (000s) 109 24 - - -Revenue per subscription residential market (ARPU)2)

– Frisurf 237 182 198– ADSL 4,490 3,630 - - -Market share ADSL 73% 74% - - -Customer churn, internet subscriptions 20.0% 20.0% 25.5% 14.0% 11.7%

TV DISTRIBUTION

Pay television subscribers in the Nordic region (000s)– Cable-TV (CATV) 571 561 357 282 270– Small antenna networks (SMATV) 1,096 1,105 1,086 937 686– Home satelitte dish (DTH) 738 657 506 405 352Revenue per subscription (ARPU)2)

– Cable-TV (CATV) in Norway 1,672 1,470 1,392 1,382 -– Small antenna networks (SMATV) in Nordic Region 226 214 245 206 -– Home satelitte dish (DTH) in Nordic Region 3,238 3,029 2,874 2,664 -Customer churn, Home satelitte dish (DTH) 19.3% 29.2% - - -1) Average monthly revenue per GSM subscription (ARPU) is calculated based on total revenues from GSM subscriptions, including subscription fees,

incoming and outgoing traffic fees, roaming and revenues from value-added services, divided on the average number of GSM subscriptions for therelevant period.

2) Average revenue per subscriber is calculated as total revenue divided on the arihmetic mean of annual opening and closing balance of subscriptions.

MARKET INFORMATION

At the end of 2002, Telenor had substantial business activitiesin 16 countries. The activities were managed through partly orfully owned companies within four business areas. Mobile com-munications is the largest area, with substantial operations in 12 countries

TELENOR

This report contains statements regarding the future prospects of Telenor, involving growth initiatives, profit figures,

strategies and objectives. The risks and uncertainties inherent in all statements regarding the future can lead to actual

profits and developments deviating substantially from what has been expressed or implied. The risk factors associated

with Telenor’s business activities are also described in form 20-F, which has been submitted to the Securities and

Exchange Commission. (Available on: www.telenor.com/ir/annual_reports)

CORPORATE ASSEMBLY

Members elected by the shareholders

Chairman: Mona Røkke, TønsbergVice-chairman: Gisle Handeland, FedjeBjørg Simonsen, AndfiskåBrit Seim Jahre, OsloEystein Gjelsvik, LanghusHilde Kinserdal, BergenJan Erik Korssjøen, KongsbergRandi Braathe, RyggeRagnar Klevaas, SandvikaOve Andersen, Kolbjørnsvik

Alternate elected by the employees

Inger-Grethe Solstad, Stavanger

Members elected by the employees

Berit Kopren, StavangerJan Riddervold, LillehammerAstri Skare, BergenStein Erik Olsen, FlaktveitArne Jenssen, Trondheim

Alternates elected by the employees

Erling Hjertnes, BergenEsther M. Strømme, OsloFrancisco M. Rasmijn, NesoddtangenRagnhild Holm, Bardu

Observers for the employees

Grethe Elin Henriksen, OsloBrit Østby Fredriksen, Drøbak

BOARD OF DIRECTORS


Board chairman: Thorleif Enger, OsloVice-chairman: Åshild M. Bendiktsen, SjøveganHanne de Mora, SwitzerlandEinar Førde, OsloJørgen Lindegaard, CopenhagenBjørg Ven, Oslo


Harald Stavn, KongsbergPer Gunnar Salomonsen, SkienIrma Tystad, Trysil


Ragnhild Laura Hundere, SelMarianne Losnegaard Jensen, OsloRagnhild Broen, TrondheimRoger Rønning, EidskogHelge Enger, KongsvingerHjørdis Henriksen, Sortland

GROUP MANAGEMENT

President and Chief Executive Officer:

Jon Fredrik BaksaasSenior Executive Vice President

and CEO of Telenor Mobile:

Arve JohansenSenior Executive Vice President

and Chief Financial Officer:

Torstein MolandExecutive Vice President

and CEO of Telenor Broadcast:

Stig Eide SivertsenExecutive Vice President

and CEO of Telenor Networks:

Jan Edvard ThygesenExecutive Vice President

and CEO of Telenor Norge:

Morten Karlsen SørbyExecutive Vice President

and Chief Technical Officer:

Berit Svendsen

ELECTED OFFICERS AND MANAGEMENT GLOSSARY AND DEFINITION OF TERMS

ADR program: American Depositary Receipts pro-gram; an ADR program is characterized by a companysigning an agreement with a bank for the depositing ofthe company’s shares in the bank. In the USA, it is ADRsecurities that are traded, not shares.

ADSL: Asymmetrical Digital Subscriber Line; methodof transmission that uses existing copper cable net-works for services that require a higher capacity in onedirection than the other, e.g. video on demand.

AMPS: Advance Mobile Phone Service; the originalstandard specification for analog mobile networks,AMPS divides a geographic area into cells in order tooptimize the use of a limited number of frequencies.

Analog: term for radio transmission where the radiowaves vary continuously in synchronization with thevoice.

ARPU: Average Revenue Per User; average revenue aservice provider has per GSM subscription.

ASP: Application Service Provider; manage and dis-tribute software over networks from a central location.

Broadband: transmission capacity with sufficientbroadband to transmit, for example, voice, data andvideo simultaneously.

CPA: Content Provider Access; enables contentproviders to charge users for content services sup-plied to them via a mobile operator’s customers, wherethe mobile operator handles all end-user invoicing.

D-AMPS: Digital Advanced Mobile Phone Service (alsoknown as the IS-136 TDMA standard); a further devel-opment of the AMPS standard, comparable to GSM.

Digital: term for radio transmission where the voicesignal is measured at regular intervals, and wherethese measured values are transmitted by the radiosignal as numerical values (0 and 1).

EBITDA: Earnings before interest, taxes, depreciationsand amortization.

GPRS: General Packet Radio Services; packet switchservice that transfers data as packets, each with itsown address.

GSM: Global System for Mobile communications; com-mon European standard for digital mobile telephonesystems.

ICT: Information and Communications Technology.

IP: Internet Protocol; the protocol (standard) that theInternet is based on.

ISDN: Integrated Services Digital Network; term for

digital networks that integrate a number of differentservices – voice, text, data and images.

MMS: Multimedia Messaging Service; a standard thatenables the transfer of formatted text, and live pic-tures and sound, to and from mobile telephones.

MVNO: Mobile Virtual Network Operators; are mobileoperators without physical network infrastructure,possessing all systems necessary to provide combinedservices and roaming to other network operators. Mayoffer subscriptions (SIM-cards) and services to end-users.

NMT: Nordic Mobile Telephone; standard for the ana-log mobile telephone system developed in the Nordicregion.

PKI: Public Key Infrastructure; is a standardisedsystem for electronic signatures and identification foruse with Internet and content services via the mobilephone and digital TV. PKI will be an important factor inthe development of electronic trade as well as publicservices to both private individuals and businesses.

PSTN: Public Switched Telephone Network; term forthe normal, analog telecoms network.

RISK: adjustment of original cost of shares by taxedprofits. The taxable cost price on the purchase ofshares is adjusted with retained and taxed profit in thecompany. This is used to avoid double taxation on theadded value.

SIM card: Subscriber Identity Module card; a smallprinted circuit board that needs to be installed in aGSM terminal before use. The card contains subscrip-tion details, security information and a memory for apersonal telephone number register.

SMATV: Satellite Master Antenna Television; jointantenna installations.

SMS: Short Messaging Service; the text messagesystem in GSM.

UMTS: Universal Mobile Telecommunications System;term for the third generation mobile network.

US GAAP: United States Generally AcceptedAccounting Principles

VPN: Virtual Private Network; service for corporatecommunication where geographically spread organi-zations with private exchanges and Centrex solutionsare linked together in one corporate network viaswitched connections in the public telecoms network.

WLAN: Wireless Local Area Network; a LAN (LocalArea Network) that is linked by means of wirelesstechnology.

2002 2001 2000 1999 1998

MOBILE COMMUNICATION

Norway

Mobile subscriptions (NMT + GSM) (000s) 2,382 2,307 2,199 1,950 1,552GSM subscriptions (000s) 2,330 2,237 2,056 1,735 1,260– of which prepaid (000s) 1,115 1,027 911 732 316Revenue per GSM subscription per month (ARPU)1) 346 340 338 341 366Traffic minutes per GSM subscription per month (AMPU) 180 181 173 169 167Market share GSM (service provider) 61.1% 60.9% 66.4% - -Customer churn - mobile subscriptions 17.5% 12.5% 12.7% 14.2% 13.1%Pannon GSM (Hungary)

GSM subscriptions (000s) 2,450 - - - -– of which prepaid (000s) 1,910 - - - -Revenue per GSM subscription per month (ARPU)1) 180 - - - -Traffic minutes per GSM subscription per month (AMPU) 113 - - - -Market share GSM 38% - - - -DiGi.Com (Malaysia)

GSM subscriptions (000s) 1,616 1,039 - - -– of which prepaid (000s) 1,519 902Revenue per GSM subscription per month (ARPU)1) 152 180 - - -Traffic minutes per GSM subscription per month (AMPU) 189 211 - - -Market share GSM 19% 17% - - -Kyivstar GSM (Ukraine)

GSM subscriptions (000s) 1,856 - - - -– of which prepaid (000s) 1,472 - - - -Revenue per GSM subscription per month (ARPU)1) 107 - - - -Traffic minutes per GSM subscription per month (AMPU) 49 - - - -Market share GSM 50% - - - -GrameenPhone (Bangladesh)

GSM subscriptions (000s) 769 464 191 61 30– of which prepaid (000s) 563 279 49 6 -Revenue per GSM subscription per month (ARPU)1) 172 190 260 - -Traffic minutes per GSM subscription per month (AMPU) 298 316 356 - -Market share GSM 69% 70% 69% - -

FIXED LINE IN NORWAY

PSTN subscriptions (000s) 1,467 1,545 1,680 1,908 2,167ISDN subscriptions (lines) (000s) 1,828 1,766 1,590 1,228 755PSTN/ISDN generated traffic (minutes in millions) 15,527 17,960 19,560 18,704 16,610Fixed line market share of traffic minutes (including Internet) 72.2% 73.2% 73.2% 87.3% 96.4%Operator access lines (000s) 49 12 - - -

INTERNET IN NORWAY

Internet subscriptions residential market (000s) 960 831 625 400 260– of which Frisurf (000s) 533 437 248 45 -– of which ADSL (000s) 90 23 - - -Internet subscriptions business market Norway (000s) 17 16 13 8 4– of which ADSL (000s) 4 1 - - -ADSL-lines wholesale market (000s) 109 24 - - -Revenue per subscription per month residential market (ARPU)2)

– Frisurf 237 182 198– ADSL 4,490 3,630 - - -Market share ADSL 73% 74% - - -Customer churn, internet subscriptions 20.0% 20.0% 25.5% 14.0% 11.7%

TV DISTRIBUTION

Pay television subscribers in the Nordic region (000s)– Cable-TV (CATV) 571 561 357 282 270– Small antenna networks (SMATV) 1,096 1,105 1,086 937 686– Home satelitte dish (DTH) 738 657 506 405 352Revenue per subscription per month (ARPU)2)

– Cable-TV (CATV) in Norway 1,672 1,470 1,392 1,382 -– Small antenna networks (SMATV) in Nordic Region 226 214 245 206 -– Home satelitte dish (DTH) in Nordic Region 3,238 3,029 2,874 2,664 -Customer churn, Home satelitte dish (DTH) 19.3% 29.2% - - -1) Average monthly revenue per GSM subscription (ARPU) is calculated based on total revenues from GSM subscriptions, including subscription fees,

incoming and outgoing traffic fees, roaming and revenues from value-added services, divided on the average number of GSM subscriptions for therelevant period.

2) Average revenue per subscriber is calculated as total revenue divided on the arihmetic mean of annual opening and closing balance of subscriptions.

MARKET INFORMATION

In addition, Telenor has satellite operations covering large parts of the world.

Telenor is Norway’s largest telecommunicationsplayer, with extensive mobile operations worldwide.At the beginning of 2003, Telenor had substantialoperations in 16 countries.

CONTENT

Telenor – internationalisation and growth 2

Positioned for growth 6

Telenor in 2002 8

Telenor is Norway’s largest telecommunications group, withsubstantial international mobile operations. Continued devel-opment of the international mobile portfolio is an integral partof Telenor’s strategy, as well as a basis for further growth.

Telenor underwent a period of strong international expansionin the 1990s. The company registers international demand forproducts developed and tested in the Norwegian market, notleast from international growth markets. The company’s strat-egy is therefore strongly associated with international growth,based on the strong Norwegian position and the enhancedposition in the Nordic region.

Telenor was listed on the Oslo Stock Exchange and Nasdaq on 4December 2000. At the end of 2002, the company had 55,840shareholders, the Norwegian State being the majority share-holder (holding 77.6% of the shares). The Telenor group’s rev-enues in 2002 totalled NOK 48.8 billion. The company’s marketvalue as of 31 December 2002 was NOK 47.8 billion, which madeit the third largest company on the Oslo Stock Exchange.

HISTORY

Telenor’s origins go all the way back to 1855, and for 150 yearsthe company has been Norway’s leading telecoms player. Inthe 1990s, Telenor went from being a state monopoly tobecome a commercial enterprise and the company is todaypositioned as an innovative player in international mobilecommunications.

In 1994, the then Norwegian Telecom was established as apublic corporation. In December 2000, the company waspartly privatised and listed on the stock exchange. This trans-formation took place as a gradual adaptation to increasingcompetition in the Norwegian telecoms market after deregu-lation in the 1990s, with free competition for all services from1998. Telenor has successfully defended its strong position inthe Norwegian market.

Telenor’s strong international expansion in recent years hasbeen based on leading-edge expertise, acquired in the Nor-wegian and Nordic markets, which are among the most highlydeveloped technology markets in the world. Internationalisa-tion was achieved on the basis of strong positions in satellitecommunications, in mobile communications and in domesticInternet activities. Telenor has been one of the world’s leadingsuppliers of satellite communications for many years. Norwayand the Nordic region have been in the forefront of the devel-opment of mobile communications, and Internet use hasquickly gained ground in this market.

Telenor is a pioneer in mobile communications. Manual mobiletelephony services were introduced in Norway in 1966, as aforerunner to the automatic NMT system, which appeared in1981. Its digital successor, GSM, was introduced in 1993.

In the same year, Telenor made its first international mobileinvestment, in Pannon GSM. Telenor opened its UMTS network(third-generation mobile network) in 2001.

INTERNATIONALISATION

In the second half of the 1990s, Telenor became involved inmobile operations in a number of countries: Russia (1994),Bangladesh, Greece, Ireland, Germany and Austria (1997),Ukraine (1998), Malaysia (1999), Denmark and Thailand(2000). Telenor’s strategy was to take positions based on thecompany’s core expertise. In 1997, Telenor’s internationalinvestments exceeded investments made in the domesticmarket – mainly as a result of the mobile commitments.

Telenor holds a prominent position in the Nordic TV market,both with regard to the number of subscribers and to theextent of coverage. At the end of 2002, Telenor distributed TVto 2.4 million Nordic customers through Canal Digital andTelenor’s cable operations. The TV activities widen the scopeof Telenor’s Norwegian and Nordic operations, primarily bysupplying new products and services, but also by providingaccess to an extensive customer base.

OBJECTIVES, VISION AND VALUES

Telenor’s principal objective is to create value for sharehold-ers through a commitment to our customers, employees andjoint venture partners, and the interest of the general public.In a long-term perspective, a strong customer and marketfocus, coupled with a strong sense of responsibility for socie-ty and the welfare of our employees, will provide the best basisfor increased value creation.

Financial value will be created through profitable and consis-tent growth, based on the development of solutions that sim-plify the use of, and increase the benefits of, modern commu-nications technology. In this way, customers (individualcustomers as well as business customers) will be offeredgreater freedom of choice and wider opportunities. Telenor’ssolutions shall simplify people’s daily lives, make companies’

TELENOR – INTERNATIONALISATION AND GROWTH

2 telenor asa R annual report 2002

telenor asa R annual report 2002 3

Mobile communications

Fixed network communications

Internet

TV-distribution

Satellite communications

Managed services/software services

IT/installation

Directories/media

1970s

NorwegianTelecom

NorwegianTelecom Telenor AS Telenor ASA

NMTNMT

PSTNPSTN

Broadcasting

Telecom

Thor IThor I Thor IIThor II Thor IIIThor III

GSMGSM SMSSMS

ISDNISDN ADSL/IPADSL/IP

IP VPNIP VPN

BravidaBravida

Telenor MediaTelenor Media

EDB BPEDB BPITIT

GPRS/UMTSGPRS/UMTS

Broadband

Canal DigitalCanal Digital

1980s 1990s 2003

A pioneer withinsatellitecommunications

Norway

A pioneer withinmobilecommunications

Norway

A pioneer withinvalue-addingservices on severalplatforms; develop-ment of Internet

NorwayThe Nordic regionEurope*South East Asia*

Development ofintegrated mobilesolutions; positioned forconvergence

NorwayThe Nordic regionEurope*South East Asia*

* Selected countries

National telecoms operator International communications player

Monopolised markets De-regulated markets

International mobile operator

ii

i iTELENOR: STRATEGIC AND BUSINESS RELATED DEVELOPMENT, 2003


operations more efficient and increase companies’ competi-tive power.

Telenor has therefore adopted the following vision for thedevelopment of its organisation and market position: Telenor– Ideas that simplify.

With this vision in mind, Telenor shall be a driving force increating, simplifying and introducing communications andcontent solutions to the market. The vision is built on Telenor’stradition as an innovator, and as one of the first to introducenew products to the market. Telenor is committed to simplifythe use of services and the channels through which customersinteract with the company.

Telenor’s focus is on realising the company’s core values. Allemployees’ conduct shall be based on three core values. To bedynamic requires insight and active involvement, coupled witha drive to accomplish. To be innovative entails continuouslybeing attentive to new opportunities for development andgrowth. To be responsible requires active participation in thecommunity surrounding the company. All employees shall beresponsible for their own actions and always put the needs ofthe customers first.

MANAGEMENT

As a responsible company, Telenor remains committed tointernal management and control, both in relation to its man-agement practices and its social responsibilities. Good corpo-rate governance has for a number of years been an importantconcern for Telenor, and was further strengthened in 2002.

To achieve good corporate governance, Telenor places greatemphasis on establishing and implementing internal guide-lines, routines and processes that shall form the basis for aresponsible management of the group. The corporate gover-nance is built on external legislation and internal guidelineswhich shall be observed in all parts of the organisation. [More

on Telenor’s corporate governance on p.18]

Telenor has developed and implemented an integrated man-agement model to strengthen the group’s ability and power torealise its strategic objectives.

The group’s management model identifies a set of primaryfinancial and non-financial factors (value drivers) both ongroup level and in the different business areas. The model shallcontribute to long-term optimisation of shareholder values.[More on the management model on p. 34]

STRATEGY

Telenor shall consolidate its leading position in the Norwegianmarket, strengthen its position in the Nordic market and con-centrate and continue to develop its international mobileoperations.

In addition to consolidation and cost control, Telenor’s strate-gy is also based on the development of mobile operations ingrowth markets. This will be done based on a broad range ofservices, and our considerable experience from working withcustomers and markets in the highly developed Norwegianand Nordic markets.

The international focus is primarily on mobile services in mar-kets where Telenor has opportunities for creating long-termvalue. These commitments are based on the company’s docu-mented expertise in establishing and developing mobile oper-ations, within the areas of technology, distribution, manage-ment and markets.

Telenor’s value creation is primarily based on three strategicareas:

– focused core activities– focused market prioritising– focused mobile communications

Core activities: Telenor’s core activities comprise mobilecommunications, fixed network communications and TV distri-bution, organised through three business areas. Additionalsubstantial activities are organised under Other activities. Themobile and fixed network operations underpin Telenor’s posi-tion in the Norwegian market, but they also include substantialinternational operations, particularly within mobile telephony.Mobile communications is the main basis for the company’sinternationalisation and growth. As from 2003, TV distributionis being developed as a core activity in the Nordic market.

Group management

Telenor Plus Telenor Business SolutionsTelenor Mobile Telenor Networks

Other activities Core activities

TELENOR’S REPORTING STRUCTURE, 2002


Market priorities: The Norwegian market is the basis forTelenor’s Nordic market platform. In addition, Telenor hasestablished itself in the international market, geographicallyconcentrated in countries in two regions outside the Nordicregion: Central and Eastern Europe and South East Asia.

Telenor shall defend its leading position in the Norwegianmarket as well as strengthen its service delivery in the Nordicmarket. On the international arena, Telenor will primarily sup-ply mobile communications solutions, with focus on regionswhere the company already has activities. These are marketswhere strong growth can be expected, and markets whichTelenor has the required strength and credibility to operate.

Mobile communications: Telenor’s primary strategic focus,both in the Norwegian and international markets, is on mobilecommunications, concentrated in selected countries in SouthEast Asia and Central and Eastern Europe, i.e. markets with amajor growth potential. Telenor’s internationalisation is basedchiefly on its position as a mobile operator, and the companyalready has a special emphasis on this segment.

The portfolio strategy within the mobile operations is to devel-op established positions, with focus on profitable growth andon achieving operational and financial control, which willrelease important synergies between the companies. Whereoperational control cannot be established in the foreseeablefuture, Telenor will seek to dispose of its interests. At the out-set of 2003, Telenor had substantial commitments in 12mobile companies in 12 countries.

Telenor places a great deal of emphasis on the mobile portfo-lio’s balance, i.e. that mature activities in saturated marketsare balanced against new operations in growth areas. Themature activities shall create enough value to give the ownersa long-term return as well as contribute to the company’sfinancial strength.

Telenor’s financial basis and commercial innovation give itcredibility as a company that is able to deliver, with docu-mented results, in the growth markets.

ORGANISATION

In 2002, the organisational structure comprised the businessareas Telenor Mobile, Telenor Networks, Telenor Plus andTelenor Business Solutions as well as Other activities.

At the end of 2002, the group had 23,450 employees, 14,150of them in Norway. As part of the strategic programme foroperational efficiency, Telenor undertook workforce reduc-tions in 2002, mainly affecting the Norwegian operations.Total number of employees was reduced by 1,500.

In accordance with its business strategy, Telenor has decided to

simplify its corporate structure into three business areas

(Telenor Mobile, Telenor Networks and Telenor Broadcast),

plus Other activities, effective from 2003. In order to provide

better follow-up and improve customer services in the Nor-

wegian market, a separate market organisation has been

established: Telenor Norge.

“2002 was a challenging year for the industry and for Telenor.Cost control and consolidation have been given first priority. Atthis juncture, it is important to underline that Telenor is in factfinancially solid and well positioned for further growth,” saysTelenor CEO Jon Fredrik Baksaas.

Jon Fredrik Baksaas is now well into his first full year as CEO ofTelenor. He is by no means a newcomer, in fact he has servedthe company since 1989, and a number of these years havebeen spent in the group management. The economist hastaken the reins at a time when the industry has been seeing alot of turbulence, but where Telenor remains financially solid,and well-positioned for continued growth.

Optimism

” Many operators are now heavily burdened with debt, and theindustry has had to take substantial write-downs,” says theTelenor CEO. “The industry is suffering from the fact that largesums of money were invested in licence fees for unknown serv-ices, on unknown terminals, based on untried business models.The debt burden requires us to revise our outlook on the futureof the industry,” maintains Baksaas. “Many companies are nowstruggling with high exposure to UMTS. Telenor has only limit-ed UMTS commitments.”

Acquisitions and debt burdens are familiar words at Telenortoo. “Our mobile portfolio contains examples of acquisitionspurchased at an excessive price,” admits the CEO. “We toohave had to take write-downs in 2002, but to a lesser extentthan other companies in the industry. And Telenor’s debt expo-sure is modest in comparison with the industry as a whole.”

Jon Fredrik Baksaas is an optimist, and maintains that Telenorshall continue to grow, on the following basis: “Telenor isfinancially solid, and well positioned for continued develop-ment and new growth. The key issues ahead will be consolida-tion and focus on the development of those areas where thecompany has its strengths.”

Control initiatives

“Consolidation and concentration form the basis for Telenor’sstrategy as well as the basis for further international growth, “explains Baksaas. “The creation of future value requires firmmanagement, and in 2002, we felt that we had to take a newhold on the company’s commercial challenges.”

“Cost control and investment rationalisation has already pro-duced visible results, and more will follow in the years to come.Telenor’s cost reduction programme, Delta 4, is on schedule.We shall reduce our annual operating costs by the end of 2004

by NOK 4 billion gross in relation to the cost level in 2001. Thegoals remain the same; a total annual saving of NOK 1.1 billionin 2002, an expected NOK 1.3 billion in 2003, and total savingsof NOK 4 billion by the end of 2004. “

“The establishment of the new market organisation Norway

was made in recognition of a lower growth rate in the Norwe-gian market. We are also seeing increased competition andcertain regulatory issues need to be settled. When other play-ers move in on our markets we have to respond by being moreefficient and more innovative. We have to live up to our vision:Ideas that simplify. Customers must recognise improvementsin our products and services, communication and follow-up.”

“The establishment of the business area Telenor Broadcast wasmade in recognition of the fact that TV distribution affords usa special position in relation to our competitors. With 2.4 mil-lion TV customers, this is a significant operation in the Nordicmarket for digital entertainment and information services,”says Baksaas, before pointing out that these activities werefurther strengtened in 2002.

“The new headquarters are an asset. Our innovative way ofcombining people, environment and technology gives us themeans to further develop our corporate culture. We have cre-ated the basis for creative interaction and working methodsthat are suited to a modern organisation such as Telenor’s.Thetechnologically advanced ICT solution Telenor Arena is nowbeing launched commercially. ”

Strategy initiatives

The control initiatives are crucial to the continued develop-ment of Telenor, and the CEO is eager to emphasise two strate-gic aspects that were introduced in 2002, and which will alsobe pursued in 2003:

“The international mobile commitments are undergoing a periodof consolidation, and we will continue to develop the portfolio.Telenor’s internationalisation is essentially based on mobilecommunications, but within limited geographical areas. Ourgeographical focus is centred on markets that have substantial-ly higher growth potential, and correspondingly lower mobilepenetration, than Western Europe. This involves a significantpotential for growth, and Telenor’s strategy is to take positions

POSITIONED FOR GROWTH


that will allow us to take part in that growth. Our commitmentsin Russia and Ukraine are central to us in this respect, and wehave entered into agreements to make further commitments.”

Telenor is also looking to win positions in the Nordic business

market: “It is important that we strengthen our ability to deliv-er in a market that to an increasing extent is looking for Scan-dinavian and Nordic solutions. Through our acquisition ofSwedish Utfors, and our agreement with Tele2 for mobileoperator access to their network in Sweden, we have strength-ened our position. I also believe that the new TeliaSonera con-stellation will drive this market further. In this situation, it iscrucial that we maintain our ability to deliver, not least to theSwedish market.”

Internationalisation

Telenor is an international group, but a small player on theglobal arena. In selected markets, however, Telenor is consid-ered to be a major player. Does the CEO see a clear road aheadfor Telenor?

”Our capacity for growth lies in internationalisation. Telenor’straditional domestic market in Norway, with 4.5 million people,and where we have market shares of 60-70%, provides limit-ed room for new growth. The Nordic market is saturated, andcharacterised by fierce competition. Which is why we find ourgrowth potential outside Norway and the Nordic region, andprimarily within mobile communications,” says Baksaas.Before going on to say:

”The internationalisation, however, is not only about geo-graphical expansion and growth, but also about developmentin the direction of real integration between companies in the

group, and above all, between the mobile companies in whichTelenor has a controlling position. Developing synergies fromour ownership is our top priority, and we are making goodprogress in this area.”

Customer focus

“Whether we will succeed depends mainly on ourselves,” saysBaksaas: “To succeed we need to strengthen our organisa-tional culture. Our recently occupied headquarters, with itsrevolutionary new work concept, provide us with a uniquestarting point. We perceive the new digital working platform,Telenor Arena, to be a powerful tool in this effort, through theway in which people, technology and environment interact.This platform is now being adopted throughout the group. Wealso need to strengthen our leadership, and furthermore, wehave focus on the significance of customer follow-up toTelenor’s value creation.”

“We shall strengthen our customer and market awareness,”declares the CEO. In this respect he finds it useful to also be acustomer. Baksaas characterises himself as a fairly advanceduser of Telenor’s services: “The mobile phone and laptop PCprovide me with access and availability that I benefit fromevery day. However, as a customer, I also see that there is roomfor improvement in customer follow-up and support.”

And Jon Fredrik Baksaas clearly intends to follow up on thisissue: ”Neither I nor Telenor shall be satisfied with our efforts ifTelenor does not emerge from the challenges of 2003 as a lesscomplex company, simplifying the workday of our customers!”

Jon Fredrik Baksaas was interviewed by Dag Leraand.

[See also presentation, p. 22]



NORWAY

• In 2002, Telenor consolidated its position as Norway’s lead-ing supplier of mobile communications solutions to the resi-dential and business markets, with close to 2.4 million regis-tered mobile subscribers. In March, Telenor launched next-generation messaging, MMS, with new multimedia services formobile phones. More than 100,000 Norwegian mobile cus-tomers were registered as subscribers to the payment solu-tion SmartPayTM, which facilitates the use of mobile phones asterminals for payment.

• Telenor was clearly Norway’s leading operator for fixed net-work services, and Telenor was also the largest supplier ofInternet access in the Norwegian residential market, bothover ISDN/PSTN, ADSL and cable.

THE NORDIC REGION

• In 2002, Telenor strengthened its position as the largest sup-plier of TV distribution in the Nordic region, with approximate-ly 2.4 million TV customers. In June, Telenor and Canal+ signedan agreement for the takeover of the remaining shares inCanal Digital. In 2002, Telenor, together with four otherNordic TV companies, held the rights to distribute the FIFAWorld Cup in the Nordic region. Telenor also entered into apartnership agreement with the Norwegian National Lotteryfor the development of interactive money games for TV.

• Telenor also strengthened its position in the Swedish busi-ness market by entering into an agreement for the takeoverof 90% of the shares in the Utfors group, at a price of SEK 264million Telenor won a contract for the supply of comprehen-sive fixed network and mobile services to 28 of the 33 munici-palities in the Swedish County of Skåne, a contract worth SEK150 million. Through Utfors, the company also entered into athree-year agreement with the Swedish National LabourMarket Board for the supply of a data communications solu-tion worth SEK 120 million.

INTERNATIONAL ACTIVITIES

• In 2002, Telenor continued to develop its position as aninternational player in mobile communications, with partic-ular focus on Central and Eastern Europe, through astrengthening of its involvement in Russia.

• In February, Telenor closed the takeover of 74.22% of theshares in Pannon GSM from KPN, Sonera and TDC, at a priceof EUR 1002 million, thereby increasing its ownership shareto 100%. In July, Telenor entered into an agreement withSputnik Funds for the acquisition of 16.5% of the shares in theUkrainian mobile operator Kyivstar GSM, at a price of USD66.5 million. In September Telenor sold 7.7% of Kyivstar GSMto Storm LLC for USD 31,0 million. thereby reducing itsownership share to 54.2%. Pannon was consolidated in Feb-ruary 2002, and Kyivistar in September in the same year.

• An agreement for further mobile service expansion in Russiawas signed in Oslo in November, in the presence of the Russ-ian President, Vladimir Putin, and the Norwegian Prime Min-ister, Kjell Magne Bondevik. Telenor and the Russian compa-nies VimpelCom and Alfa Group each contributed one third ofthe total investment of USD 175.4 million.

• In December, Telenor sold its ownership share of 49% in theregional Russian mobile operator Extel to VimpelCom, with anaccounting gain of approximately NOK 45 million after tax.

• Telenor’s international Internet commitments were furtherreduced in 2002.

ORGANISATION

• In June, Jon Fredrik Baksaas took over as CEO of Telenor, suc-ceeding Tormod Hermansen, who had held the position since1991. In December, Tom Vidar Rygh resigned as the Chairmanof the Board of Telenor to take up a new position in Sweden.Vice-chairman Åshild Bendiktsen acted as chairman until anew chairman, Thorleif Enger, was appointed in March.

• In December, Telenor decided to simplify its corporate struc-ture into three business areas: Telenor Mobile, Telenor Net-works and Telenor Broadcast, plus a portfolio of Other activ-ities. At the same time a separate market organisation forNorway was established, Telenor Norge. The new structurebecame operative as of 1 January 2003.

• In September, Telenor opened its new headquarters atFornebu, just outside Oslo. At the same time, Telenorlaunched a new ICT solution, Telenor Arena. In November,Telenor’s new premises in Kristiansand were opened as aregional office and a technological showcase for the Agderregion of Southern Norway.

TELENOR IN 2002

The Directors’ Report shows Telenor as a solidorganisation well-positioned for profitable growth.The board considers that revenues of NOK 48.8 billionin 2002 and a strengthened international positionindicate a robust financial situation and a goodplatform for further value creation.

CONTENT

Directors’ Report 2002 10

Telenor’s Corporate Governance 18

Telenor’s Board of Directors 20

Telenor’s Group Management 22

2002 was a challenging year for the European tele-communications industry. In response to this new marketreality, Telenor made write-downs and implemented workforcereductions amounting to NOK 7.6 billion. As a consequence,the result before taxes and minority interests showed a lossof NOK 5,136 million.

1. HIGHLIGHTS

At the beginning of 2003, Telenor’s financial situation is solid,and the group has a good platform for further value creation.In 2002, the company worked on cost control and improvedefficiency through the Delta 4 reorganisation programme,which has successfully improved margins in basic operations.Revenues, excluding gains, amounted to NOK 48.7 billion. Thisis a growth of NOK 8.1 billion, or about 20%, compared with2001 . Combined with the growth in the company’s internation-al activities, this should form the basis for positive financialdevelopment in the future.

During 2002, workforce reductions were implemented, affect-ing slightly more than 1 ,500 employees in Telenor’s Norwegianoperations.

In 2002, Telenor took important steps towards increasedinternationalisation, among other things by acquiring majori-ty holdings in the mobile operators Pannon (Hungary) andKyivstar GSM (Ukraine), while at the same time selling minorityinterests in the Russian companies Extel and StavTeleSot. Byconsolidating companies outside Norway, Telenor is estab-lishing itself as an international group. In the fourth quarter of2002, 35% of Telenor’s revenues were from its internationalactivities, and 40% of the group’s employees worked outsideNorway.

Telenor ASA is registered in Norway, and in 2002, the companyopened its new headquarters at Fornebu, outside Oslo. On 21June, Jon Fredrik Baksaas succeeded Tormod Hermansen asGroup CEO.

To simplify and reinforce Telenor’s position in the domesticmarket, a separate market area was created at the beginning of2003, comprising all sales and marketing activities in themobile and fixed network areas in Norway. This means that from1 January 2003, Telenor has three business areas, which com-prise mobile operations, fixed network operations and TV oper-ations, and in addition, Other Activities. Financial reportingfrom the first quarter of 2003 will be based on this structure.

As of 31 December 2002, Telenor ASA had 55,840 share-holders, with the Norwegian State representing the largestsingle shareholding (77.6%). The ten largest owners repre-

sented 85.39% of the existing shares. Shareholders held1 .803.426.1 27 shares in the company, representing a totalshare capital of NOK 1 0,820,557,032. The Telenor share isquoted on the Oslo Stock Exchange and Nasdaq.

On 31 December 2002, Telenor’s shares were quoted at NOK26.50 on the Oslo Stock Exchange, compared with NOK 38.50one year earlier. While this represents a fall of 31 %, the DowJones European Telecom Index fell by 38% in the same period,and the OSE Benchmark Index by 31 %. Once again, Telenor wasamong the ten most traded shares on the Oslo StockExchange.

2. FINANCIAL PERFORMANCE

Key figures In 2002, Telenor’s result after taxes and minor-ity interests was a loss of NOK 4,298 million, or a loss of NOK2.42 per share. The corresponding figures for 2001 were aprofit of NOK 7,079 million and NOK 3.99 per share.

In 2002, loss before taxes and minority interests was NOK 5,1 36million, compared with a profit of NOK 1 0,255 million in 2001 .The result for 2002 was charged with a total of NOK 7.6 billionin the form of costs associated with workforce reductions, netlosses on disposals and write-downs. This compares with sig-nificant sales gains realised in 2001 . The result before taxes andminority interests increased by NOK 2.9 billion to NOK 2.5 bil-lion for 2002, after adjustment for the net effects of gains,losses, write-downs and costs associated with restructuring.This is related to underlying growth, cost reductions and theacquisition of new activities. During the year, cost reductionsamounting to approximately NOK 1 .1 billion were implementedin connection with the Delta 4 programme for improving oper-ational efficiency.

In 2002, the book value of the publicly listed company DiGi.Comin Malaysia was written down by NOK 2.1 billion, DTAC/UCOM inThailand by NOK 0.9 billion and Sonofon AS in Denmark by NOK1 .0 billion, based on the continuing fall in the value of mobilecompanies. Telenor also found it necessary to make a number ofother write-downs as a consequence of declining asset values.In addition, approximately NOK 1 .0 billion was charged as anexpense in connection with restructuring measures, of whichcosts in connection with workforce reductions comprisedapproximately NOK 0.7 billion for the entire group.

DIRECTORS’ REPORT 2002


The operating result for 2002 was a loss of NOK 320 million,compared with a profit of NOK 3,1 77 million in 2001 . Thedecline is attributable to the same factors as those mentionedabove, and the operating profit after adjustment for the neteffect of sales gains and losses, write-downs and costs forrestructuring, increased by NOK 2.0 billion to NOK 4.3 billion in2002. The operating result was positively influenced by devel-opments in Telenor Mobile, including the effect of the consol-idation of former associated companies in 2001 and 2002. Theoperating result was charged with costs for the marketing ofADSL in Telenor Plus, as well as the consolidation of Canal Dig-ital, while the operating loss in Telenor Business Solutions wasreduced, mainly as a result of fewer loss-making operations inNextra International. The adjusted operating result in TelenorNetworks was in line with 2001 .

The result for associated companies was a loss of NOK 2,450million, compared with a profit of NOK 8,237 million in 2001 .The decline was connected with significant sales gains in 2001 .The results were also influenced by the fact that a number ofcompanies were converted from associated companies to sub-sidiaries in 2001 and 2002, as well as by the effects of write-downs in both 2001 and 2002. There was a good underlyinggrowth in revenues and profits in a number of the associatedcompanies, principally in the international mobile operations.

Net financial costs increased by NOK 1 ,207 million to NOK2,366 million in 2002, mainly as a result of lower gains fromsales of shareholdings and increased net interest expenses.Significant write-downs of shareholdings were made both in2001 and in 2002. In connection with the acquisition of busi-nesses, net interest-bearing liabilities increased in the courseof 2001 and 2002, contributing to higher interest expenses.

Current and deferred taxes totalled an income of NOK 480million in 2002. Tax-deductible losses were realised in con-nection with the liquidation and sale of companies. This waspartly offset by a tax claim in relation to a challenge ofTelenor’s 2001 tax return associated with the group internalsale of shares in Sonofon Holding A/S and a lawsuit in Greece,both of which were recorded as tax expenses in 2002. In Janu-ary 2003, Telenor issued a writ against the Norwegian taxauthorities in connection with the Sonofon case.

The cash flow from operating activities increased by NOK 5.9billion from 2001 to NOK 1 2.9 billion in 2002. This was principal-ly the result of increases in revenues, and operating margins andaccruals, which were partly offset by increased tax and interestpayments. The consolidation of DiGi.Com in 2001 and PannonGSM and Kyivstar in 2002 contributed NOK 3.1 billion.

Telenor invested NOK 21 .3 billion in 2002, of which NOK 1 2.4billion was acquisition of businesses. COMSAT Mobile Commu-nications was acquired with effect from 1 1 January 2002, theacquisition of Pannon GSM in Hungary was completed on 4February 2002 and the acquisition of the remaining 50% of theshares in the Canal Digital group (Norway, Sweden, Denmarkand Finland) was finalised on 30 June 2002.

At the end of 2002, Telenor’s total balance was NOK 89.5 bil-lion and the equity ratio (including minority interests) was41 .7%, which is a reduction from 55.3% in 2001 . Net interest-bearing liabilities totalled NOK 26.9 billion, an increase of NOK1 3.7 billion during the year. In the opinion of the Board,Telenor’s financial position is satisfactory.

Pursuant to Section 3-3 of the Norwegian Accounting Act weconfirm that the accounts have been prepared on the basis ofa going concern assumption.

Comments regarding the business areas

Telenor Mobile Telenor Mobile provides mobile voice, data,Internet and content services, as well as electronic commerce,in Norway and a selection of countries abroad. The businessarea is by far the leading supplier of such services to the Norwe-gian market, and a pioneer in the development of new servicesin the field of mobile communications. Telenor Mobile is amongthe 1 2 largest mobile communications operators in the world.


Operating profit, Telenor Group; 1998–2002

NOK in millions

2002 (320)

2001 3.177

2000 3.629

1999 4.002

1998 3.797

The total revenues in Telenor Mobile increased by NOK 7,788million to NOK 20,346 million in 2002. NOK 7.0 billion of thisincrease resulted from the consolidation of DiGi.Com, PannonGSM and Kyivstar GSM during 2001 and 2002. In addition tothis, there was good underlying growth due to the increase inthe number of subscriptions, both at GrameenPhone inBangladesh and in Norway, where the revenue per subscriberalso increased.

The operating profit was reduced by NOK 1,081 million to NOK1,414 million in 2002, largely as a consequence of the write-down of DiGi.Com in 2002. Apart from this, there was anunderlying positive trend associated with improved marginsand new companies.

The results from Telenor Mobile’s associated companies andjoint venture activities fell by NOK 11.7 billion to a loss of NOK 2.0billion in 2002. The decline must be seen in the context of con-siderable sales gains achieved in 2001. The 2002 loss is attrib-utable to depreciation and write-downs of Telenor’s excess val-ues, while the net income after tax in the associated companieswas positive as a consequence of considerable increases in theircustomer bases. After adjustment for Pannon and Kyivstar,which are now consolidated as subsidiaries, and Extel, which wassold at the end of 2002, there was an increase of 2.1 million inTelenor’s pro rata share of subscriptions in international associ-ated mobile telecommunications companies, which reached 5.1million at the end of 2002. The growth was particularly high inDTAC in Thailand and in VimpelCom in Russia.

Telenor Networks Telenor Networks provides fixed networktelecommunications services in Norway. Telenor Networksoffers traditional analogue fixed telephony services (PSTN),digital fixed telephony services (ISDN) and value-added serv-ices to the residential market. Telenor Networks also offersPSTN and ISDN and leased lines to businesses and the publicsector. Additionally, this business area provides interconnec-tion and capacity services such as leased lines and operatoraccess to other network operators and service providers.

The total revenues decreased by NOK 80 million to NOK 16,488million in 2002. The total traffic minutes in the fixed network onthe Norwegian market fell by 8.5% in 2002, as a result of thetrend towards wireless traffic and the increase in the use of

ADSL, where the volume of traffic is not measured. Telenor Net-works’ market share of traffic minutes fell by five percentagepoints to 63% by the end of 2002, but was compensated forTelenor as a whole by increased market shares in the TelenorPlus and Business Solutions business areas.

Telenor Networks’ operating result increased by NOK 351 mil-lion to NOK 2,526 million in 2002, mainly as a consequence ofreduced write-downs.

Telenor Plus The Telenor Plus business area is the leadingsupplier of TV-based services in the Nordic region. The servicescomprise the transmission of TV and radio signals through theoperators Norkring and Satellite Broadcasting. Through CanalDigital, Telenor Avidi, Sweden On-Line and Telenor Vision, arange of TV services, Pay-TV and digital services are providedto customers in the Nordic region via satellite dish, cable TVand smaller closed networks. The business area is also a lead-ing supplier of Internet access and services to the residentialmarket in Norway.

Total revenues increased by NOK 1,476 million to NOK 4,862million in 2002, primarily as a result of the consolidation ofnew companies, including Canal Digital, and the increase inADSL sales. The number of TV subscribers increased by 3.5%to 2.4 million in 2002, while the number of ADSL subscribersincreased by 67,000, to reach 90,000.

The operating loss in 2002 was NOK 883 million, comparedwith a loss of NOK 841 million in 2001. The increased loss is con-nected with the effects of new companies and the increasedsales of and marketing activities for ADSL, which were partlycounteracted by lower write-downs as compared with 2001.

Telenor Business Solutions Telenor Business Solutions pro-vides a broad range of communications solutions and solutionsfor application services (ASP) to the business market in Nor-way. The business area also provides IP-based communica-tions services in a selection of European countries, in additionto systems integration in the UK. Telephony, IP-based commu-nications solutions, data communications and advanced net-work services are also supplied to the business market in Swe-den. The Russian company Comincom/Combellga suppliestelecommunications services mainly in the Moscow area.


0 2.0 4.0 6.0 8.0 10.0 12.0

6.4

10.4

11.6

8.9’02

’01

’00

’99

Capex; 1999–2002(NOK in millions)

0 10.0 20.0 30.0 40.0 50,0

6.8

40.3

7.2

12.4’02

’01

’00

’99

Acquisitions; 1999–2002(NOK in millions)

The total revenues of Telenor Business Solutions increased byNOK 217 million to NOK 6,157 million in 2002, as a result of thefull year effect of the consolidation of Telenordia in Sweden,increased internal group sales of data services connected toADSL sales in Telenor Plus, and increased revenues in Comin-com/Combellga in Russia. This was partly counteracted by thelower sales of ASP, managed services and software, resultingfrom weak market conditions, and fewer units in Nextra Inter-national.

The operating loss in 2002 was NOK 1,807 million, comparedwith a loss of NOK 2,968 million in 2001. The improvement isassociated with cost reductions and a reduction in loss-mak-ing business in Nextra International, improved margins con-nected with internal group sales of access network and com-munications services in Norway, as well as lower write-downsand costs resulting from restructuring and loss-making con-tracts. This was partly counteracted by reduced sales of ASP,managed services and software.

Other activities Other activities consist mainly of the listedsubsidiary EDB Business Partner ASA, in which Telenor had ashareholding of 51.8% at the end of 2002, as well as otherbusiness units, Corporate Functions and Group Activities.

The total revenues in EDB Business Partner ASA were reducedby NOK 470 million to NOK 4,341 million in 2002. The declineis attributable to lower demand, especially from other Telenorcompanies, as a result of weak market conditions. The operat-ing loss in 2002 was NOK 409 million, which represents animprovement of NOK 799 million, compared to 2001. Both in2001 and 2002, write-downs were implemented, and costswere incurred in connection with restructuring activities.Adjusted for these effects, the operating result showed adecline compared with 2001, resulting from lower revenues.

The total revenues for other business units were NOK 3,978million in 2002, which is slightly lower than in 2001. The rev-enues in Satellite Services increased, principally as a result ofthe consolidation of COMSAT in the US. The revenues in Satel-lite Networks also increased as a result of new contracts.Itworks filed for bankruptcy in April 2002, contributing toreduced revenues. The combined operating loss for otherbusiness activities was NOK 90 million, but this represented an

improvement over 2001 of almost NOK 600 million, as a con-sequence of the improved performance of Satellite Servicesand Satellite Networks, as well as the cessation of the losses inItworks and TTYL. In 2002, expenses were recorded in Tele-service, and write-downs in Telenor Innovation also had anegative effect compared with 2001.

Total revenues in Corporate Functions and Group Activitieswere NOK 2,850 million in 2002, representing a reduction ofapproximately NOK 5 billion resulting from gains from the saleof Telenor Media in 2001. The operating result fell by NOK5,324 million to give a loss of NOK 1,185 million, as a conse-quence of lower net sales gains in 2002, restructuring costsand increased deprecations connected with the new Fornebuheadquarters and new computer systems.

3. NON-FINANCIAL INFORMATION

The day-to-day management of Telenor requires emphasis onboth financial and non-financial objectives and managementparameters. Certain non-financial factors receive particularattention, such as the expertise of employees, the company’scustomer relations and its position in the various markets.Customer satisfaction and brand name recognition are essen-tial for the long-term development of results and assets.

Working environment In 2002, Telenor continued to con-centrate on following up sick leave, ergonomics, fire preven-tion, and subcontractors and the systematic improvement ofthe working environment at all levels in the group. A total of71 audits were carried out in order to monitor these areas in thegroup’s subsidiaries. Sick leave in 2002 was 5.0%, as com-pared with 4.9% in 2001. The long-term objective is to reducesick leave to 4.0%. In 2002, 12 injuries leading to absence werereported, none of which were serious, in addition to a total


Operating profit (loss); 1999–2002

NOK Business

in millions Mobile Networks Plus Solutions Other

2002 1.414 2.526 (883) (1.807) (1.570)

2001 2.495 2.175 (841) (2.968) 2.316

2000 1.594 3.047 135 (1.173) 26

1999 1.106 2.884 132 (430) 310

of 16 injuries (which did not lead to absences) and 5 near-accidents.

The external environment The environmental impact peremployee in Telenor is low. The group has an impact on its sur-roundings primarily as a result of its size, and that impact islargely associated with energy consumption, travel andinstallation activities.

Efforts to reduce Telenor’s energy consumption in Norwayresulted in a fall of 5.6%, to 507 GWh, of which an estimated 87%comes from renewable energy sources such as hydro-electrici-ty and district heating. In 2002, the total emissions of CO2 fromTelenor’s operations in Norway amounted to 17,000 tonnes,which is a reduction of 13.7% from 2001.

Telenor’s new office buildings at Fornebu, Kokstad in Bergenand Elvebredden in Kristiansand are innovative in their use ofenvironmentally friendly solutions, which are leading to lowercosts for the company as well as a reduced impact on the envi-ronment.

Indexes In 2002, Telenor was quoted on the Dow Jones Sus-tainability Indexes. The company also maintained its positionon the FTSE4Good index and was awarded the “Best in Class”distinction by Storebrand Kapitalforvaltning for its work onsocial responsibility.

Skills and education Telenor considers it important toattract and retain skilled employees, and continues to devel-op its open internal labour market. Regular monitoring ofemployees’ attitudes and experience of various aspects oftheir workplace is carried out, and the results are used in thecompany’s improvement work.

A survey of Norwegian students placed Telenor in secondplace among the companies they would most like to work for.

As an element of Telenor’s efforts to attract and retain goodmanagers, an options programme was implemented whichapplied to approximately 80 employees. The programme willprobably cover 100 employees in 2003, and managers and keypersonnel did not receive the usual salary adjustment on1 January 2003.

4. ALLOCATIONS

In 2002, the parent company, Telenor ASA, recorded a net lossof NOK 2,626 million.

The Board of Directors proposes that the Shareholder’s meet-ing approve the payment of a dividend of NOK 0.45 per sharefor 2002.

The Board of Directors also proposes the payment of a GroupContribution of NOK 137 million after taxes.

The Board of Directors proposes the following allocations (inNOK milllions):

Dividends 799Transferred from other equity (3,425)Total (2,626)

After these allocations, the company’s distributable equity asof 31 December 2002 totalled NOK 7,652 million.

5. REGULATORY MATTERS

Telenor’s regulatory framework conditions are of significantimportance for the company’s ability to create value for itsshareholders and for society. The authorities can exert influ-ence which can result in significant changes in the balance ofthe market, Telenor’s revenues and the profitability of invest-ing in new technology and new services. In recent years theregulatory authorities in Norway have chosen to pursue anactive policy of regulation and monitoring which has present-ed significant challenges for Telenor’s business activities.

The Board of Directors emphasises the need for Telenor tocontribute to an efficiently run telecommunications market inNorway. In the opinion of the Board, it is inappropriate to sub-ject individual operators in Norway to controls which are moredetailed and radical than those of other European countries.Such controls may also lead to significant socio-economiccosts. In the long term, this may weaken the incentives forfuture investments in Norwegian infrastructure and servicedevelopment. Telecommunications prices in Norway arealready among the lowest in the OECD, and Norway is current-ly among the world leaders in mobile communications servic-es such as SMS, MMS and mobile payment solutions. In spite of

0 10,000 20,000 30,000 40,000 50,000

28,999

33,567

37,572

46,040

48,826’02

’01

’00

’99

’98

Revenues; 1998–2002Telenor Group (NOK in millions)


this, Norwegian regulatory authorities appear to have chosento exercise a control and monitoring policy involving consider-able regulatory risk for the company and its investors by cre-ating uncertainty regarding the profitability of Telenor’s largeinvestments in network and service development.

Telenor pays particular attention to regulatory factors in itsinternational portfolio, and the development in regulatoryframework conditions for the company’s activities outsideNorway in 2002 has on the whole been positive. It is assumedthat the development in the direction of more stable frame-work conditions will continue in 2003.

The Ministry of Transport and Communications has initiated arevision of Norwegian telecommunications legislation afterthe EU passed new resolutions on electronic communicationsnetworks and services. The aim of the regulations is to ensurethat consumers receive high quality services at acceptableprices through effective competition. The Board considers thisan important principle, and expects the EU regulations to beimplemented and enforced in a harmonised fashion in allEU/EEA countries.

In the spring of 2003, the Norwegian Government presented awhite paper to the Norwegian Parliament regarding mobilecommunications activities in Norway. The Board considers itpositive that the Government in the white paper indicates thatregulatory measures must consider the need to provideincentives for further development of infrastructure and newservices in the Norwegian market.

6. COMPANY MANAGEMENT

Corporate governance In 2002, Telenor continued to payconsiderable attention to the formal and fundamental frame-work for the management of the company, both as regardsmanagement practices and social responsibility, with the mainfocus on safeguarding the long-term interests of the owners.Following the passing of the Sarbanes-Oxley act in 2002. Thenew regulations will lead to greater awareness with respect tointernal control, reporting and accounting matters, amongother things by placing requirements on the documentation ofwork practices and assessments. The Board will ensure thatTelenor fulfils these new requirements.

For many years, Telenor has made use of internal regulations anddirectives as management tools, to supplement the legallyimposed regulations. The Board has appointed a subcommittee(Compensation Committee) which at the request of the Board willassess the total remuneration of the group CEO, as well as thepolicy regarding remuneration of managers at various levels.

In 2002, Telenor continued to provide active communicationwith the financial market and provide information to theshareholders, thereby ensuring that all the basic informationessential for the external assessment of the company waspublicised in accordance with applicable rules and guidelines.

Throughout 2002, the Board kept up-to-date with the com-pany’s strategic planning, placing particular emphasis on themonitoring of financial performance, work on cost-reducingmeasures and investment matters. Earlier investments havebeen followed up by way of special evaluation reports.

The Board On 18 June 2002, the Corporate Assembly ofTelenor elected Hanne de Mora as a new shareholder-electedmember of the Board of Telenor ASA. At the same time, Vice-Chairman Åshild Bendiktsen was re-elected as shareholder-elected member. Both appointments are valid for one year. Atthe same time, Bente Neegård Halvorsen left the Board.

All the shareholder-elected Board members are up for re-election in the spring to summer of 2003.

On 3 December 2002, Tom Vidar Rygh resigned as the Chair-man of the Board of Telenor ASA to take up the position of CEOof Enskilda Securities AB. Vice-chairman Åshild Bendiktsenacted as chairman until the new chairman, Thorleif Enger, wasappointed in March.

In January 2002, the President and CEO, Tormod Hermansen,notified the Board that he wished to step down at the end ofthe first half of 2002. On 26 April, the Board decided toappoint Jon Fredrik Baksaas as the new CEO of Telenor, and hetook up the position on 21 June 2002.

With the exception of the representatives elected by theemployees, no Board members are employed by Telenor orengaged in work for Telenor.


The Board of Telenor works in accordance with guidelines for itswork and procedures. The Board held 15 Board Meetings in 2002.

7. ORGANISATION AND PERSONNEL

At the end of 2002, the Telenor Group had 23,450 employees,representing 22,100 man-years. 14,150 of these worked inNorway and 9,300 outside Norway. The total number ofemployees at the end of 2001 was 22,050. 60% are male and40% are female.

Based on the market developments in recent years, there wasa need to reduce costs and rationalise operations. As part ofthe company’s efforts to achieve this, a significant workforcereduction was implemented in the Norwegian operations in2002. To ensure the greatest possible consideration for thoseaffected, the company has provided financial support andcouncelling, in addition to internal labour market initiatives.

The company has also practiced a partial hiring freeze, andgreatly reduced its use of consultants.

Co-operation between the management and the employees’organisations functions well within the framework of the gen-eral agreement between the employers’ association, the Nor-wegian Association of Publicly Owned Companies (NAVO), andthe central organisations(SAN).

Telenor decided to implement an organisational adjustmentfrom 1 January 2003 to reinforce the organisation and there-by form the best possible starting point for the continueddevelopment of activities in Norway while at the same timeensuring continued international growth in the mobiletelecommunications field. From this date, the business activi-ties are operated through three business areas, TelenorMobile, Telenor Networks and Telenor Broadcast, which fromthe same date form the basis of the company’s financialreporting structure, with the addition of Other activities. A separate market organisation, Telenor Norge, has beenestablished to simplify and reinforce Telenor’s position in thedomestic market, while a new group management, adapted tothe altered organisational structure, has been set up.

8. RISK FACTORS

Telenor’s activities are exposed to a number of risk factors,

principally of regulatory, legal, financial and political nature. Itis important for the Board to ensure that the company imple-ments measures to control and reduce the risk factors, toensure that the total risk is at all times kept within commer-cially acceptable limits.

In the Norwegian market, new and modified regulations byregulatory authorities and civil action based on allegedbreaches of the telecommunications regulations present aconsiderable challenge and an element of uncertainty. In theinternational market, there are special risk elements in certaincountries, such as political climate, exchange rate fluctua-tions, regulatory conditions, partner risk in joint projects, etc.

Telenor assesses these risk factors in detail, both in connec-tion with new investments, and continuously in the case ofexisting investments. In its international ventures, the compa-ny has attempted to balance the risk situation for investmentsoutside Norway by distributing its portfolio between matureand immature markets. The Board has systematicallyreviewed and evaluated the company’s commitments so as toassess the development of the individual projects in the lightof an up-to-date risk situation.

Telenor is exposed to financial market risks related to changesin interest rates and foreign exchange rate fluctuations. Finan-cial instruments are used to reduce such risks. The group hastaken the necessary steps to maintain a satisfactory financialflexibility in the aftermath of the turbulence in the capital mar-kets in recent years.

9. OUTLOOK FOR 2003

The rationalization of operations will continue in 2003, withthe focus on keeping the costs down and thereby increase thecash flow from operations.

Telenor expects continued growth, particularly from our inter-national mobile companies. In addition, the full-year effect ofthe consolidation of Kyivstar GSM, Pannon GSM and CanalDigital will be realised. Revenues are expected to increase forthe group as a whole.

The rationalization of operations through Delta 4, will contin-ue in 2003 and is expected to contribute to increased margins

0 5.000 10.000 15.000 20.000 25.000

20.200

21.950

20.150

21.000

22.100’02

’01

’00

’99

’98

Number of full-time equivalent employees; 1998–2002Telenor Group


in the Norwegian part of the group. In the international part ofthe group, several of the companies are now in a maturephase, which is expected to have a positive effect on the mar-gins. Combined with the increase in revenues, this is expectedto result in a considerable improvement in the underlyingEBITDA and in the operating profit.

Capital expenditure is expected to be in line with 2002 despitethe consolidation of Kyivstar GSM, Canal Digital and PannonGSM.

Telenor believes that an increasing proportion of the revenuesand profits will come from international operations, with ahigher degree of exposure to exchange rate fluctuations thanpreviously. Simultaneously, the risk will increase due togreater exposure to emerging markets. In addition, significantportions of the company’s activities are experiencing regula-tory risk, both in Norway and internationally.

Thorleif Enger Åshild M. Bendiktsen Hanne de Mora

Board Chairman Board Vice-chairman Board member

Einar Førde Jørgen Lindegaard Bjørg Ven

Board member Board member Board member

Harald Stavn Per Gunnar Salomonsen Irma Tystad

Board member Board member Board member

Jon Fredrik Baksaas

President & CEO


In 2002, Telenor continued its endeavours to achieve bestpractice in its standards of corporate governance. A consider-able effort was made to introduce and implement internalguidelines, processes and routines. Telenor’s corporate gover-nance is founded on public legislation and internal guidelines.

PRINCIPLES OF GOVERNANCE

Telenor’s legal management structure is partly set by a body oflaws that regulates the activities, and partly by its own regula-tions, internal bodies and directions. Telenor ASA is a Norwegiancompany, but Telenor is also an international group. Interna-tional subsidiaries have their own management bodies, whichact in accordance with the prevailing legislation in each country.

MANAGEMENT SYSTEM

Telenor’s operations are organised under a formal corporatestructure with Telenor ASA as the parent company; a holdingcompany that includes group management and group units,regulated in accordance with the Act relating to Public Limit-ed Companies

As of 2003, the Telenor group is divided into three businessareas, plus one area for Other activities and a market organi-sation for Norway. The President and Board of Telenor ASAcorrespond to the CEO and Board of the Telenor group. TheBoard of Telenor ASA is responsible for the operations inunderlying subsidiaries via the CEO, and the CEO via the headsof the relevant areas.

MANAGEMENT BODIES

The formal governance of Telenor ASA is undertaken throughthe central bodies, the Annual General Meeting (AGM), theCorporate Assembly and the Board of Directors.

The AGM is the body through which the shareholders exercisetheir overall authority, based on one vote per share. The AGMis authorised to approve the annual accounts, the Directors’report and the dividend to be paid out – all on the recommen-dation of the Board and the Corporate Assembly. The AGMappoints the ten shareholder-elected members to the corpo-rate assembly, it appoints two of the four members sitting onthe Nomination Committee, as well as the external auditor.

The Corporate Assembly elects the Board members andChairman, supervises the Board and management’s adminis-tration of the company, and is empowered to make decisionson certain issues. The Corporate Assembly submits a state-ment to the AGM on whether the Board’s proposed profit andloss account and balance sheet should be approved, plus aproposal for the application of profit or coverage of loss.

Telenor ASA’s corporate assembly consists of 15 members whoare normally elected for two years at a time. Ten of thesemembers are elected from the shareholders at the AGM, andfive are selected from and by the employees.

The Nomination Committee is responsible for submitting tothe AGM recommendations on the choice of shareholder-elected members and deputy members to the corporateassembly, plus a recommendation to the corporate assemblyon the choice of shareholder-elected Board members. TelenorASA’s Nomination Committee consists of four members, all ofthem representing the shareholders. The members are elect-ed for a two-year period. Two members are elected by theAGM, and two by and from the corporate assembly’s share-holder-elected members, the leader of the corporate assem-bly being one.

The Board is responsible for the direction and proper organi-sation of the company. This includes a responsibility to super-vise and exercise control of activities. The Board submits anannual report and financial statements to the AGM, as well asa recommendation for the application of profit or the coveringof any losses. Telenor ASA’s Board consists of 10 members,seven of which are elected by the Corporate Assembly, andthree from and by the employees. All members are elected fora two-year period. The Corporate Assembly also elects theBoard Chairman and Board Vice-Chairman.

The Remuneration Committee is a working committee re-sponsible for evaluating the total remuneration to the CEO andto managers reporting directly to the CEO. The committeeshall also recommend a proposal for policies and schemesthat affect companies’ management salary policies, includingbonus programmes, share schemes, etc.

The CEO is in charge of the day-to-day management of oper-ations in Telenor ASA and the Telenor group. The CEO isresponsible for ensuring that the company and group areorganised, run and developed in accordance with current leg-islation, regulations and resolutions passed by the Board, thecorporate assembly and the AGM. Telenor ASA’s CEO isappointed by the Board and is under obligation to report to theBoard. The CEO and the group management have corporatestaff and units that support them in their work. The CEO is also

TELENOR’S CORPORATE GOVERNANCE



head of the Ethical Council, which shall ensure the observanceof corporate ethical guidelines. The Council shall evaluateconcrete ethical questions, assessing day-to-day situationsas well as business-related matters.

The Group Management now consists of seven members,including the CEO, CFO and CTO, as well as the heads of the busi-ness areas and the head of the Norwegian market organisation.

The Compliance Officer shall ensure that the company acts inaccordance with applicable law, regulations and legally bind-ing directions issued by public authorities, and furthermore,that internal conduct in the organisation does not conflict withTelenor’s own policies, regulations and guidelines. The compli-ance officer reports to the CEO and shall ensure that the grouptakes sufficient measures to secure that prevailing regulationsare observed.

The Group Auditor (internal auditor) performs random revi-

sions throughout the group, based on risk analyses. The audi-tor submits evaluations and advice on internal control, gover-nance and operational efficiency. The work is undertaken inaccordance with international standards. The Group Auditorreports to the CEO, and occasionally to the Board.

The Disclosure Committee shall support efforts to meet therequirements in the American “Sarbanes-Oxley Act”, which ismaking increasingly strong formal demands with respect toaccounting, internal control and corporate governance. Thecommittee shall issue internal directives, provide follow-upand contribute to ensure that requirements are met. The com-mittee is chaired by the CFO, and all members have relevantexpertise.

The Investment Committee shall give advise to the CEO andthe group management on investment issues of a certain size.The committee is chaired by the CFO, and all members haverelevant expertise.

Remuneration Committee

President/CEO

Group Management

Business Areas

Board

Corporate Assembly

Investment Committee

Disclosure Committee

Nomination Committee

Annual General Meeting (AGM)

Group Auditor

Compliance Officer

Auditor

TELENOR’S MANAGEMENT SYSTEM, 2002–2003

TELENOR’S BOARD OF DIRECTORS


Thorleif Enger (1943)

CHAIRMAN

Thorleif Enger was elected to theBoard on 1 October 2001, andwas made Chairman on 3 March2003. He is Executive Vice Presi-dent and a member of the groupmanagement at Norsk Hydro,with responsibility for the Agribusiness area. Thorleif Engerbegan working for Norsk Hydroin 1973 and has held a number ofpositions in the company. He isChairman of the Board of TrekaA/S, and a Board member ofKverneland and PSG and a mem-ber of ABB’s corporate assembly.Thorleif Enger has a doctorate inStructural Engineering from theUniversity of Colorado in the US.

Åshild M. Bendiktsen (1945)

VICE-CHAIRMAN

Åshild M. Bendiktsen was electedto the Board in June 1994, andwas a Board member untilNovember 1999. She was re-elected in May 2000 and sinceJuly 2000 has been Vice-Chair-man of the Board. She was againelected on 18 June 2002 andfunctioned as Chairman from3 December 2002 to 6 March2003. Åshild Bendiktsen isChairman of the Board of NHO inTroms, and sits on NHO’s Execu-tive Board. She is Vice-Chairmanof the Board of the Norut Group,and was State Secretary at theMinistry of Transport andCommunications in 1986-88 and1990-91. She has studied eco-nomics and is Finance Directorwith Bendiktsen & Aasen AS.

Hanne de Mora (1960)

BOARD MEMBER

Hanne de Mora was elected tothe Board on 18 June 2002. Shehas previous experience fromDen norske Creditbank inLuxembourg and from Proctor& Gamble in Geneva andStockholm. Hanne de Morahas been with McKinsey inStockholm since 1996 and was apartner from 1996 to 2002 whenshe started her own consultancyfirm in Switzerland, where she isChairman of the Board. She isalso a board member of TomraSystems ASA. She has a Masterof Business Administrationdegree from Barcelona.

Bjørg Ven (1946)

BOARD MEMBER

Bjørg Ven was elected to theBoard on 1 October 2001. Shehas been a partner in the lawfirm Haavind Vislie in Oslo, since1980. She is Chairman of theAppeal Board of the Oslo StockExchange and the Appeal Boardfor Public Acquisitions. Bjørg Venwas appointed substitute judgeat the EFTA court in Luxembourgand is Chairman of the Board ofthe National Insurance Fund inNorway and Gjensidige NOR. Sheis a solicitor with attendancerights at the Supreme Court inNorway.

Einar Førde (1943)

BOARD MEMBER

Einar Førde was elected tothe Board on 1 October2001. He is an independentconsultant and was theManaging Director of theNorwegian BroadcastingCorporation (NRK) from1989 to 2001. He is Chair-man of the Board of NorskTelegrambyra, and a boardmember of Digital Vision AS.Einar Førde was a member ofparliament for the LabourParty in Norway from 1969to 1989, Minister for Religionand Education from 1979 to1981, parliamentary leaderof the Labour Party from1986 to 1989 and deputyleader from 1981 to 1989.

Irma Tystad (1943)

BOARD MEMBER

Irma Tystad was elected tothe Board on 20 June 2000by the employees. Shebegan working for Telenor in1962, where she has heldvarious positions. IrmaTystad has been a Boardmember of Telenor Plussince 1995 and in TelenorPension Fund since 1997.She is the group employeerepresentative for Kommu-nikasjonsforbundet (Unionof Communications(Norway)). She is a graduateof the Technical College ofNorwegian Telecom andsubsequently studiedentrepreneurship andmanagement.

Harald Stavn (1954)

BOARD MEMBER

Harald Stavn was elected tothe Board on 20 June 2000by the employees. He beganworking for Telenor in 1974,where he has held varioustechnical positions. He is aBoard member of TelenorPension Fund and theExecutive Board of NITO(Norwegian Society ofEngineers), employeerepresentative for NITO inTelenor. Harald Stavn waseducated as a businesseconomist at Handels-høyskolen BI (the NorwegianSchool of Management) inOslo.

Per Gunnar Salomonsen

(1954)

BOARD MEMBER

Per Gunnar Salomonsen waselected to the Board on1 November 2000 by theemployees. He beganworking for Telenor in 1973,where he has held variouspositions, most recently asOperations Engineer. From1995 to 2000 he was aBoard Member of TelenorNett. Salomonsen is a groupemployee representative forEl&IT-forbundet (El & ITUnion) in Telenor. PerGunnar Salomonsen is aqualified engineer.

Jørgen Lindegaard (1948)

BOARD MEMBER

Jørgen Lindegaard was elected tothe Board on 1 October 2001. Heis the CEO of SAS. JørgenLindegaard’s background is in thetelecommunications industry,and since 1975 he has heldmanagerial positions in FynsTelefon A/S, København TelefonA/S and TeleDanmark A/S. He isChairman of the Board ofSonofon Holding A/S and a Boardmember of Finansieringsinstitut-tet for Industri og Håndværk A/S.Lindegaard is a Graduate Engi-neer with telecommunicationsand is a member of The Academyfor Technical Sciences inDenmark and Norway.



Jon Fredrik Baksaas (1954)

President and CEO

Jon Fredrik Baksaas joined Telenor in 1989 and has held positions asDirector of Corporate Finance, Executive Vice President and CEO ofTBK AS. He was appointed Deputy CEO of Telenor in 1997 and hasserved as Telenor’s CEO since 21 June 2002. Before joining Telenor,Jon Fredrik Baksaas held finance-related positions in Aker AS, Stolt-Nielsen Seaway and Det norske Veritas. He holds a Master ofScience in Business Administration from the Norwegian School ofEconomics and Business Administration in Bergen and has additionalqualifications from IMD in Lausanne, Switzerland.

Torstein Moland (1945)

Senior Executive Vice President and CFO

Torstein Moland joined Telenor in 1997 as Senior Executive VicePresident with responsibility for finance and economics. Prior to takingup this post, he was Head of the Central Bank of Norway and Presidentof Norske Skog. He also served in the Norwegian Ministry of Financewhere he developed economic policies. He was later appointed StateSecretary to the Prime Minister. Torstein Moland is a graduateeconomist with additional qualifications from Massachusetts Instituteof Technology.

Arve Johansen (1949)

Senior Executive Vice President and CEO of Telenor Mobile

Arve Johansen joined Telenor in 1989 and has held several positionsincluding CEO of Telenor International AS. He has been SeniorExecutive Vice President since 1999 and CEO of Telenor Mobile since2000. Prior to this, he was Executive Vice President of EB Telecom,Research Engineer at the Norwegian Institute of Technology, and healso worked at ELAB. Arve Johansen graduated as an electronicsengineer (telecommunications) from the Norwegian Institute ofTechnology in Trondheim and took part in the Programme forManagement Development at Harvard Business School.

Jan Edvard Thygesen (1951)

Executive Vice President and CEO of Telenor Networks

Jan Edvard Thygesen joined Telenor in 1979 and has held severalpositions including Executive Vice President of Telenor Mobile, CEO ofTelenor Invest AS, Executive Vice President of Telenor Bedrift AS andCEO of Telenor Nett AS. He has been the head of Telenor Networks since1998. Jan Edvard Thygesen graduated in electronics and telecom-munications from the Norwegian Institute of Technology in Trondheim.

Stig Eide Sivertsen (1959)

Executive Vice President and CEO of Telenor Broadcast

Stig Eide Sivertsen joined Telenor in 1997 as Director of CorporateFinance for Telenor Link AS. He has previously held positions as CEOof Nettavisen and Director of Corporate Finance in Petroleum Geo-Services ASA and Schibsted ASA. Stig Eide Sivertsen studied law atthe University of Bergen and has an MBA from Durham University.

Morten Karlsen Sørby (1959)

Executive Vice President and CEO of Telenor Norge

Morten Karlsen Sørby joined Telenor in 1993 and has held a number ofdifferent positions in the group, including Finance Director and CEO ofTelenor International, Executive Vice President of Telenor Mobile from2000 to 2002, and CEO of Telenor Norge from 2003. He has previouslyworked at Arthur Andersen & Co in Oslo, primarily in IT, telecom andmedia. Morten Karlsen Sørby holds a Master of Science in BusinessAdministration and is a state authorised public accountant (Norway).He also has qualifications from IMD, Lausanne.

Berit Svendsen (1963)

Executive Vice President for Technology (CTO)

Berit Svendsen joined Telenor in 1988 and has held a number ofdifferent positions, most recently as Project Director for FMC (FixedMobile Convergence) and as CEO of data services. She was appointedExecutive Vice President and CTO in 2000. Berit Svendsen has an MSEEdegree from the Norwegian University of Science and Technology and aMaster of Technology Management degree from the Norwegian Schoolof Economics in Bergen and Massachusetts Institute of Technology.

Arve Johansen, Jan Edvard Thygesen, Torstein Moland, Jon Fredrik Baksaas, Berit Svendsen, Morten Karlsen Sørby. Stig Eide Sivertsen was not present when the photo was taken.

TELENOR’ S GROUP MANAGEMENT

Telenor’s vision shall inspire a systematic effort toimprove our customer service by providing simplifiedcommunications solutions. Telenor is committed to theidea that innovation and simplicity are essential tovalue creation.

Simplicity …

… is the ultimate …

… sophisticationLeonardo da Vinci

Ideas that simplify Telenor

A PIONEER AND A DRIVING FORCE

Telenor has been a pioneer in the development of modern telecommunications. Based onexperience from a demanding domestic market, Telenor has developed advanced solutionsin satellite and mobile communications and taken these to an international market. Telenorwill continue to be a driving force in the development of new solutions, primarily withinmobile communications.

RENEWS AND SIMPLIFIES

Telenor has an inspiring vision: Ideas that simplify. Telenor is committed to creating, devel-oping and launching new solutions that simplify our customers’ workday. We believe thatby simplifying our own organisation and routines we can achieve competitive power andvalue-creation.

Activities in Telenor’s four business areas in 2002,were characterised by consolidation and cost control.The international focus on mobile operationswas strengthened.

CONTENT

Activities and value creation 34

Telenor Mobile 38

Telenor Networks 42

Telenor Plus 44

Telenor Business Solutions 46

Other activities 48

Telenor has extended the scope of its non-financial reportingactivities and this is reflected in the Annual Report for 2002.Non-financial information provides important indications of thegroup's long-term value creation potential.

Non-financial information is central to the improvement ofefficiency and innovation and the strengthening of customerand market awareness. It will provide greater insight into cen-tral factors in the group’s value creation, and markets and thesurrounding world will be better equipped to evaluate the com-pany. Such information is also included in the sections from theindividual business areas, in the Financial review.

MANAGEMENT MODEL

Telenor has developed a management model for its activities,which includes both financial and non-financial parameters.The management model is the framework for the businessplanning and follow-up of activities in the business areas. Thepurpose of the management model is to contribute to the long-term optimisation of shareholder values, strengthen thegroup’s ability and power to realise its strategic objectives andensure the overall administration and control of activities.

In addition to financial information, Telenor’s managementmodel builds on four core areas for management information:

Customers, Markets and Society The group’s social respon-

sibility, the behaviour and attitudes of customers and suppliers

in relation to customer care and market positioning.

Internal processes The quality and efficiency of the group’s

internal business and support processes and systems.

Innovation The group’s innovation and creativity with respect

to technology, products, services and markets.

Expertise and learning The group’s ability to attract, devel-op and retain the proper expertise, including its reputation asan employer, skills development, motivation, commitment andleadership.

A set of performance indicators (value drivers) has beendefined for each of the business areas. These are based onimportant success factors for achieving Telenor’s strategy andare part of the management system. They include strategydevelopment, the drawing-up of business plans and budgets,reporting, result follow-up and incentives.

CUSTOMERS, MARKETS AND SOCIETY

Purpose The purpose of Telenor’s efforts in the managementarea Customers, Markets and Society are:

High-quality customer awareness and customer care Detailedmonitoring of customer care and market positioning shall formthe basis for initiatives to ensure high quality and satisfactorycustomer service and customer care in Telenor.

A strong position and a strong brand A good reputation and astrong market position are determining factors in ensuring cus-tomer loyalty and market appeal. In the markets where Telenor

ACTIVITIES AND VALUE CREATION


Internal processes

Expertise, learning

Financial

Customer, Markets, Society Innovation

MAIN ELEMENTS IN TELENOR’S INTEGRATED MANAGEMENT MODEL

has activities, the company shall be seen as dynamic, innova-tive and responsible, and as a company that rethinks solutionsand services and systematically simplifies its customers’ work-day. The brands of fully owned Telenor subsidiaries will be givensimilar follow-up.

A commitment to social responsibility Telenor shall strive toachieve best practice with respect to its social responsibilitiesin the markets where the group has activities. Our concern forour social responsibility considerations shall be integral to thegroup’s business development and operation, in relation toproducts and services, employees, partners, suppliers andother parties.

The year 2002 The Telenor group operates under a varietyof brand names in the markets where it has activities. In Nor-way, the Telenor brand forms the basis for our future commer-cial market orientation. In January 2002, we initiatied a projectto develop Telenor’s branding strategy and underpin thegroup’s vision of simplifying and improving products and serv-ices, and increase customer satisfaction. The aim of this work isto enhance Telenor’s reputation as a simplifier and an innovator.

Telenor’s Norwegian customer and market surveys have beenimproved in an effort to achieve better follow-up of customersatisfaction and customer perception. It is a clear goal toincrease customer satisfaction in the Norwegian market thisyear. This will also improve our market position. Our surveyshave already given us valuable information about areas wherecustomer satisfaction levels need to be improved.

Telenor works systematically with questions relating to busi-ness ethics and social responsibilities. In 2002, particularemphasis was placed on drawing up common guidelines forethical conduct among managers and employees in the group.

In 2002, Telenor was listed on the Dow Jones SustainabilityIndexes. The group also maintained its listing on FTSE4Goodand was recently awarded the distinction “Best in class” byStorebrand Kapitalforvaltning for its efforts in environmentaland social responsibility.

Telenor’s environmental work showed a positive developmentfrom 2001 to 2002. The company’s new office buildings at

Fornebu, Bergen and Kristiansand have all contributed to mas-sive reductions in the group’s energy consumption in Norway.

Initiatives The co-ordination of the activities in Norway isimportant to strengthen the group’s customer care. The newmarket organisation, Telenor Norge, was made operative on 1January 2003, to bring together all sales and market activitiesfor the mobile, Internet and fixed network activities in Norway,in both the residential and business markets. The co-ordina-tion of customer services and simplified internal workprocesses shall contribute to better follow-up and customercare.

INTERNAL PROCESSES

Purpose Telenor is working systematically to improve busi-ness and support processes that can contribute to improvedcustomer awareness and cost-effectiveness. This work focus-es on better co-ordination along the value chains and betweenthe different units in the group, in order to simplify and improvethe efficiency of the work. These efforts will be strengthened inthe future.

Delta 4 is a group programme which aims to reduce the com-pany’s cost base in 2004 by NOK 4 million gross in relation tothe cost base in 2001. Delta 4 shall improve the efficiency ofoperations, and ensure that Telenor works as an integratedgroup. Its aims shall be achieved through initiatives such asstandardisation, simplification and reuse; vigorous cost cut-ting, more integration of management, systems, routines andinvestments, also with relation to the markets.

The year 2002 Project based work is central to Telenor’sperformance. To strengthen our achievements in this area wehave introduced a joint project model and a special trainingprogramme, which provide a framework for this form of work.

Delta 4 was initiated in 2002, and has provided analyses ofpotential areas of improvement, design of new solutions andsuggested joint initiatives for the whole group. In 2002, costreductions totalling NOK 1.1 billion have so far been realised.This includes workforce reductions of 1500 employees. Thelargest cost reductions come through efficiency measures inthe group’s IT systems, by introducing common system plat-forms and joint purchasing agreements.


Initiatives As of 2003, Telenor’s joint training programmefor project managers will form the basis for the internal certi-fication of new project managers. The efficiency of projectwork will be assessed in the annual internal value creationsurvey.

Delta 4 shall primarily realise gains across the business areastructure, but the programme will also achieve gains via costreduction initiatives launched separately in the businessareas. The gains from these initiatives will be reported at thegroup’s quarterly result presentations. A number of projectsassociated with purchasing, IT systems, customer relations,network structure and management, staff and support func-tions and economy functions have been launched as part ofthe Delta 4 programme.

INNOVATION

Purpose Telenor’s innovation activities comprise anythingfrom the development of differentiated price structures andnew subscription plans for telephony and mobile telephony tothe development of broadband services, mobile data services,and new business opportunities.

The aim of Telenor’s innovation activities is primarily to increasethe group’s turnover through the development of new products,services and business concepts. We also aim to make innova-tion activities more targeted and efficient though concreteevaluations and initiatives.

The year 2002 Telenor now has a more integrated strategyfor the management of its innovation activities, and will be fol-lowing a milestone schedule in its future resource allocation tothe major initiatives. In addition, a number of smaller innovationgroups have been co-ordinated into one powerful unit. Telenorhas made certain advanced commitments to services such asmobile Internet and interactive services for TV, and has adjust-ed its commitments in relation to the commercial success ofthese services.

Telenor’s integrated management system has been strength-ened in 2002, by introducing clear value drivers for innovationthroughout the organisation, and by increasing its focus oninnovation at the quarterly result presentations.

Initiatives The most important focus areas will be:Mobile data services and applications Telenor has developedleading-edge expertise both within third generation mobiletelephony (UMTS) and new mobile network structures such asWireless LAN (WLAN). To speed up the development of newdata services for the mobile phone, open user interfaces arebeing prepared, to allow new services (such as the mobile wal-let) to be developed in collaboration with external partners.

Broadband solutions and applications ICanal, which isinvolved in providing attractive content (such as games), is oneof Telenor’s most important commitments in the broadbandarea and shall contribute to customer growth. Telenor isinvolved in developing concepts that will allow interaction andviewing of such content on both TVs and PCs.

Communication solutions to private industry and public admin-

istration Telenor Arena is Telenor’s solution for interactionbetween people, environment and technology. It is marketed toprivate industry and to public administration. The solution hasbeen developed based on Telenor’s own ICT solution atFornebu, and involves a full outsourcing of ICT services.

Opportunities for new business Development trends can offernew opportunities for business.

Examples of such development trends are:• Spontaneous networks set up between users, such as in a

WirelessLAN zone, or with the help of Bluetooth. The networksare characterised by being independent of any network oper-ator, and that the traffic avoids invoicing. The option of com-munication between PCs and mobile telephones or betweenmobile telephones via Bluetooth has already been imple-mented in standard PCs and mobile phones.

• So-called omnipresent computing is based on future com-puter technology on a level where we all not only own a PC,but where invisible data power is built into parts of our sur-roundings, allowing applications to “think” for themselves.This will greatly alter our future communication needs.

EXPERTISE AND LEARNING

Purpose Telenor aims to attract, retain and develop its ownexpertise in order to remain a leading knowledge-based com-



pany. To realise this, particular emphasis will be placed onforming close ties between skills development and training andcommercial operations; on developing new ways of workingand improved ICT tools; on maintaining and developing a solidreputation as an attractive employer, and on learning quickerand more effectively than our competitors.

The year 2002 Telenor regularly conducts systematicemployee surveys to find out how well employees adapt to theirworking environment.

Surveys made in 2002 show that 70% of the employees aresatisfied with how the Telenor headquarters at Fornebu live upto the vision of being the leading workplace for innovativeactivities in the Nordic region. This includes the use of newelectronic equipment. The result of external surveys in 2002

showed that Telenor is second on the list of companies forwhom Norwegian students would most like to work.

Initiatives A main focus in 2003 will be to clarify the compa-ny’s managerial principles. Management development willbe strengthened by such means as coaching, job rotation, e-learning and other management programmes.

The incentive scheme for 2003 is formulated such that allbonus agreements for managers and key personnel will containcommon group objectives linked to financial and customer-related parameters, and Telenor’s social responsibilities.Greater emphasis will also be placed on strengthening theTelenor culture, and on further development of Telenor Arenaas a tool for the efficient co-operation of people, their environ-ment and technology.

Telenor Mobile is Telenor’s principal channel for future growth.In 2002, the international mobile portfolio generated 39% ofthe Telenor group’s operating income. Continued developmentof the mobile portfolio is pivotal to the group’s positioning asan international telecoms player.

INTRODUCTION

Telenor Mobile is Telenor’s business area for the developmentand operation of mobile services for voice, data, Internet, con-tent services and electronic commerce in the Norwegian,Nordic and international markets. Telenor Mobile has owner-ship interests in 12 mobile operations in 12 countries. Six ofthese are consolidated in Telenor’s accounts, and six have sta-tus as associated companies. The international commitmentsare geographically concentrated in selected countries inEurope and South East Asia.

Telenor Mobile’s international commitments are based onTelenor’s experience, expertise, products and solutions devel-oped in the Norwegian market. In 2002, Telenor Mobile imple-mented a reorganisation of its activities to enable greaterfocus on synergy effects between the mobile operations.

Consolidated subsidiaries:

Telenor Mobil AS, Norway Established in 1993, TelenorMobil AS is Norway’s leading provider of mobile telephony andmobile data communications, and one of the country’s twodigital mobile telephony operators. The company providesservices in three mobile telephony networks and one person-al paging network. Telenor Mobil is the only operator providinganalogue mobile services in the Norwegian market. The com-pany’s GSM 900 licence is valid until 2005, and the GSM 1800licence until 2010. Both can be extended. The NMT 450 licenceexpires in 2004, and the personal paging network, establishedin 1984, will be phased out in September 2003. The nationwideGSM network was upgraded with the addition of GPRS in 2001.Telenor Mobil is one of the two remaining licence holders forUMTS in Norway. The first part of the network was opened inDecember 2001.

Telenor Mobil supplies a range of digital mobile telephonyservices, with a number of subscription alternatives and anextensive portfolio of additional services. Telenor Mobil con-tinues to develop new, advanced additional services, with spe-cial focus on mobile Internet and mobile data services. InMarch 2002, Telenor Mobil introduced MMS, and the compa-ny also provides m-Commerce services, including paymentsolutions through Content Provider Access (CPA), using PublicKey Infrastructure (PKI) technology.

Pannon GSM, Hungary Established in 1993, Pannon GSM isthe second largest of three mobile operators in Hungary.Telenor was involved in founding the company and at the end of2002 held a 100% ownership share, after increasing its share by74.22% in February of that year. Pannon launched commercialoperations for its GSM 900 network in 1994, and opened itsGSM 1800 network early in 2001. GPRS was launched in 2001.The company plans to participate in the auction bidding forUMTS licences if the conditions are right, and aims to becomethe leading supplier of mobile services in Hungary.

DiGi.Com Berhad, Malaysia Established in 1995, DiGi.Com isthe third largest of five mobile operators in Malaysia. Telenorbecame part owner in 1999, and held, at the end of 2002, anownership share of 61.00%. DiGi.Com has been listed on thestock exchange in Kuala Lumpur since 1997. The companyoperates a GSM 1800 network, and launched GPRS in 2002.DiGi.com has a special focus on younger subscribers anddjuice™ was launched in Malaysia in 2000. The company hasmade a strategic decision not to apply for a UMTS licence, andaims to offer its customers 3G access through partnershipswith other network operators.

Kyivstar GSM, Ukraine Established in 1997, Kyivstarbecame the leading mobile operator in the Ukraine in 2002.Telenor became part owner in 1998, and at the end of 2001held an ownership share of 54.21%. The company operates aGSM 900 network, and in 2001 the company became marketleader; a position the company intends to keep.

GrameenPhone Ltd, Bangladesh Established in 1997,GrameenPhone is the largest of four mobile operators inBangladesh. Telenor became part owner in 1997, and at theend of 2002 held an ownership share of 46.40%, representing51.00% of the votes. GrameenPhone launched its GSM 900network in 1997 and the company is the only one inBangladesh with nationwide service coverage. Grameen-Phone has developed a rural network with a special VillagePhone programme, which in 2002 had 23,000 terminals inoperation in more than 21,500 villages.

Associated companies and shared activities:

Sonofon Holding A/S, Denmark Established in 1991, Sono-fon is the second largest of four mobile operators in Denmark.

TELENOR MOBILE


Telenor became part owner in 2000, and at the end of 2001held an ownership share of 53.50%. Sonofon operates GSM900 and 1800 networks; GPRS was launched in 2000, andbroadband via Fixed Wireless Access in 2001. MMS serviceswere introduced in 2002.

VimpelCom, Russia Established in 1992, VimpelCom is oneof Russia’s leading mobile operators, and market leader in theMoscow region. Telenor became part owner in 1999, and at theend of 2002 held an ownership share of 28.98%. The compa-ny is listed on the New York Stock Exchange. VimpelCom oper-ates a D-AMPS network in addition to GSM 900 and 1800 net-works, and launched GPRS in 2001.

Total Access Communication Company PCL (DTAC), Thai-

land Established in 1989, DTAC is Thailand’s second largestmobile operator. Telenor became part owner in 2000, and atthe end of 2001 held an ownership share of 40.30%, with29.90% in DTAC and 24.90% in its former parent company,United Communication Industry PCL (UCOM). DTAC is listed onthe Singapore stock exchange and UCOM on the Bangkokstock exchange. DTAC operates an AMPS 800 mobile serviceand a GSM 1800 service. GPRS was launched in 2002.

Connect Austria GmbH, Austria Established in 1997, Con-nect Austria is the third largest of four mobile operators inAustria. Telenor became part owner in 1997, and at the end of


Telenor is a leading player in international mobile communications, and our ability to develop advanced solutions is interna-tionally recognised. The increasing popularity of mobile solutions, is being driven in part by service portfolio enhancements.The third generation mobile system UMTS will add additional functionality.

0 2 4 6 8 10

0,3

1,2

3,4

4,9

10,0’02

’01

’00

’99

’98

Mobile subscriptions outside Norway; 1998–2002 (based on Telenor’s proportional ownership interests)(millions)

2002 held an ownership share of 17.45%. Connect Austriaoperates a nationwide GSM 1800 network, as well as being aprovider of Internet and fixed line solutions. GPRS waslaunched in 2002. In 2000, the company was awarded a UMTSlicence through auction.

Cosmote, Greece Established in 1998, Cosmote is thelargest operator in the Greek mobile market. Telenor becamepart owner in 1998, and at the end of 2002 held an ownershipshare of 18.00%. Cosmote is listed on the stock exchanges inAthens and London. Cosmote operates a nationwide GSM 1800network and an EGSM 900 system. GPRS was launched in 2001.In the same year the company was awarded a UMTS licence.

ProMonte GSM, Montenegro Established in 1996,ProMonte is Montenegro’s first mobile operator. Telenorbecame part owner in 1996, and at the end of 2002 held anindirect ownership share of 44.10%, through its shareholding inETL Luxembourg.

StavTeleSot, Russia StavTeleSot was established in 1997,and is one of two mobile operators in Stavropol County in theNorthern Caucasus. At the end of 2002, Telenor held a 49.00%ownership share in the company, which was sold to VimpelComin January 2003.

THE YEAR 2002

Telenor became the majority shareholder in a further two com-panies in 2002, as Hungarian Pannon GSM and Ukrainian KyivstarGSM were consolidated. The purchase of 74.22% of the shares inPannon GSM from KPN, Sonera and TDC was finalised in Febru-ary, at a price of EUR 1002,0 million. Subsequent to the transac-tion, Telenor became sole owner of the Hungarian mobileoperator. In July 2002, Telenor entered into an agreement for theacquisition of 16.50% in Kyivstar GSM from Sputnik Funds. Thecost of this transaction was USD 66.5 million. In September,Telenor entered into an agreement with Storm LLC, involving thesale of a 7.7% share in Kyivstar GSM, at a price of USD 31.0 mil-lion, thereby reducing Telenor’s ownership share to 54.21%.


COMPANY PORTFOLIO AS OF 31 DECEMBER 2002, TELENOR MOBILE

Owner- Subscriptions (000s)1)

Population

Company ship (%) 2002 2001 2000 Market (millions)

Telenor Mobil AS 100.00 2,382 2,307 2,199 Norway 4,5

Pannon GSM2) 100.00 2,450 1,953 1,217 Hungary 10,2

DiGi.Com Berhad 61.00 1,616 1,039 824 Malaysia 23,8

Kyivstar G.S.M. JSC 54,21 1,856 1,095 302 Ukraine 49,8

GrameenPhone Ltd. 46.41 769 464 191 Bangladesh 131

Sonofon Holding A/S2) 53.50 1,103 941 875 Denmark 5,4

VimpelCom3) 28.98 5,158 2,112 834 Moscow-area 15,3

Total Access Comm. Co. PCL (DTAC)4) 40.30 5,455 2,738 1,403 Thailand 61,2

Connect Austria GmbH2) 17.45 1,337 1,301 1,133 Austria 8,1

Cosmote2) 18.00 3,506 2,943 2,061 Greece 10,9

ProMonte GSM3) 44.10 267 159 109 Montenegro 0,7

StavTeleSot 49.00 175 70 28 Stavropol 2,71) Subscriptions are calculated after three months’ churn for pre-paid subscriptions unless stated otherwise. 2) Subscriptions are calculated after twelve months’ churn for pre-paid.3) Subscriptions are calculated after six months’ churn for pre-paid .4) Subscriptions are calculated after two months’ churn for pre-paid.

0 0.5 1.0 1.5 2.0 2.5

1,6

2,0

2,2

2,3

2,4’02

’01

’00

’99

’98

Mobile subscriptions in Norway; 1998–2002(millions)

In 2002, Telenor Mobile reinforced its commitment in Russiathrough its interest in VimpelCom. The company aims tobecome a nationwide service provider through VimpelCom-Region, of which Telenor became part owner in 2002. Anagreement for further mobile service expansion in Russia wassigned in Oslo in November, in the presence of Russian Presi-dent Vladimir Putin and Norway’s Prime Minister Kjell MagneBondevik. In December, Telenor sold its 49.00% shareholdingin the Russian operator Extel to VimpelCom.

In September, Telenor Mobile entered into two agreementswith Tele2, giving the companies MVNO access to each other’sGSM and future UMTS networks in Norway and Sweden. Thiswill represent the first ventures into Mobile Virtual NetworkOperations in the two countries. The agreements have a five-year duration, and pave the way for commercial launch in2003.

Four companies in Telenor’s mobile portfolio hold UMTSlicences, but due to the general situation with regard to thedevelopment of terminals, commercial operations have yet tobe launched. In Norway, Telenor opened the first part of itsnetwork in December 2001. Cosmote in Greece and ConnectAustria tested their networks in 2002, and services could belaunched in 2003. Telenor Mobil in Norway, Cosmote in Greeceand Sonofon in Denmark launched Multimedia Messaging Ser-vices (MMS) in 2002. In March, Telenor Mobile, throughdjuice™, signed an agreement with the Walt Disney InternetGroup for the distribution of mobile content to the Nordicmarket.

VALUE CREATION

Throughout 2002, Telenor strengthened its position as amobile operator, primarily through continued growth in theinternational markets. At the close of 2002, the total numberof subscribers in Telenor’s portfolio of mobile companies was26.07 million, compared with 17.12 million the previous year.The highest subscriber figures were from DTAC in Thailand(5.46 million) and VimpelCom in Russia (5.16 million), whereTelenor held ownership shares of 40.30% and 28.90% respec-tively. Telenor’s six consolidated mobile companies had a totalof 9.07 million subscribers. Kyivstar has a stated aim of reach-ing three million subscribers by the end of 2003. GrameenPhone exceeded 750.000 subscribers in 2002, and was iden-

tified percentage wise as the fastest growing mobile operatorin South East Asia. In the same year, the number of mobile sub-scribers also exceeded the number of fixed line subscribers inBangladesh. In February, Pannon exceeded two million sub-scribers, and is now capable of covering 96% of the Hungarianpopulation. Both VimpelCom and and Sonofon passed impor-tant milestones in 2002, five and one million subscribersrespectively.

In 2002, Telenor Mobile developed its international mobileportfolio through a systematic transfer of skills and by com-paring best practice between companies. Telenor Mobile alsosought to realise scale advantages, through negotiations ofpurchasing contracts and by harmonising technical infra-structure, products and brands between companies.

Telenor Mobil AS consolidated its position as market leaderwithin mobile telephony in the Norwegian market, a customerbase which has seen strong growth in recent years, althoughthe growth has been flattening in the last two years. At the endof 2002, the number of subscribers was 2,38 million, a marketshare of 61%, at the same level as at the end of 2001. In 2002,approximately 100.000 people were registered as subscribersto the payment solution SmartPay™, which enables customersto use their mobile handset as a wallet. Telenor Mobil alsolaunched the service MMS. A number of new initiatives werelaunched to strengthen the company’s competitive power,such as new contractual subscriptions, improved customerservices and more efficient interactive channels of contact.[See also Financial review; pp. 54-59]

Key figures, Telenor Mobile; 2000–2002

NOK in millions 2002 2001 2000

Total revenues 20,346 12,558 9,779

EBITDA 7,482 4,067 2,720

Operating profit 1,414 2,495 1,594

Associated companies (2,030) 9,677 (460)

Investments 12,625 7,211 32,843

Number of full-time equivalent

employees 6,551 4,217 2,481

0 500 1,000 1,500 2,000

51

361

902

1,373

1,692’02

’01

’00

’99

’98

SMS and content messages in Norway; 1998–2002(millions)


Telenor Networks handles the group's fixed network operationsin Norway, Sweden, Russia and Central Europe. In thecompany’s international commitments, the focus is on marketniches in the field of business communication. The demandfor capacity and broadband services is growing in all markets.

INTRODUCTION

Telenor Networks is Telenor’s business area for the develop-ment, operation and supply of communications solutionsbased on the fixed network. The solutions are supplied to theprivate, commercial and wholesale markets in Norway, as wellas to the international business and wholesale markets.

Telenor Networks has its customers in both the end user mar-ket and the wholesale market. In the residential market,telephony/ISDN is supplied directly to end users, but in thebusiness market the services are mainly provided via agentsand partners. In the wholesale market, which consists of oper-ators and various service providers, Telenor Networks suppliesa broad range of services, from access to basic infrastructureto full value network services, that are re-sold through othercompanies. Telenor Networks’ key market is Norway, with lim-ited activities in selected European markets.

At the end of 2002, Telenor Networks consisted of four units:• Sales, Markets and Products, which has the profit responsi-

bility for Telenor Networks’ product portfolio. The portfolioconsists of Telephony and of the EOR product groups(expansion, operations and group co-location of technicalequipment), Broadband access, Emergency services,Capacity, Value adding services, Interconnection andOperator access.

• Operations and supply, which handles the processes foroperating and supplying communication solutions, in addi-tion to operational planning and expansion. This unit com-prises well over half of the employees in the business area.

• Network solutions, which is responsible for the productionplatforms, infrastructure, telephony services, advanced net-work services, maritime radio and purchasing.

• IT and Focus, which co-ordinates and manages the develop-ment of IT systems, as well as supervising a strategic pro-gramme for improvement measures and cost reductions inthe business area.

In the international market, solutions such as direct dialling andcapacity are offered through Telenor Global Services AS.Telenor Networks has established its own activity in Slovakia(Telenor Telecom Slovakia s.r.o) and the Czech Republic(Telenor Networks Czech s.r.o) – in addition to Svalbard, viaTelenor Svalbard AS. As a result of the restructuring of the

group, Telenor Networks assumes responsibility in 2003 for theRussian fixed network company Combellga and the mergedcompanies Utfors AB and Telenor Business Solutions AB, whichserve the Swedish wholesale and commercial market.

THE YEAR 2002

At the end of 2001, the Norwegian Post and Telecommunica-tions Authority instructed Telenor to offer subscriptionsunbundled from traffic. Throughout 2002, work progressed todevelop and arrange IT systems to handle this type of service,which is offered as an ordinary service from 1 January 2003.

In October, the largest and most advanced operations centrein Northern Europe was opened at Telenor’s new headquartersat Fornebu, outside Oslo. In addition to monitoring Telenor’sown network, the centre also handles the operation of a num-ber of external customers’ networks. The establishment of theoperations centre is an element in Telenor Networks’ work toautomate and improve the efficiency of operations and supplyprocesses.

VALUE CREATION

With approximately 1.7 million private subscribers, Telenor isby far the leading operator of fixed network services on theNorwegian market. The total number of traffic minutes gener-ated by Telenor Networks’ subscribers was 15,527 million, adecline of 14.5% in the residential market and 11.9% in the busi-ness market. The decline is primarily due to the fact that ADSLuse is measured in terms of capacity rather than registeredtraffic minutes. Increased traffic over mobile networks alsocontributes to this trend.

At the end of 2002, Telenor had a market share in the end usermarket for fixed network telephony of 72%, including TelenorInternet. This was the same share as at the end of the previousyear. The market share was 71% in the residential market and76% in the business market. At the end of 2002, Telenor hadapproximately 1,210,000 PSTN subscriptions and approxi-mately 500,000 ISDN subscriptions in the residential market.242.000 PSTN subscriptions and 280.000 ISDN subscriptionswere registered in the business market. This corresponds to anISDN penetration of 35%, which is the highest in the world.

As the result of an early commitment to ISDN, and the digitali-

TELENOR NETWORKS


sation of the telecommunications network, Telenor today oper-ates a fixed network of high quality and low error rate. This hasenabled us to offer high-quality ADSL access. At the end of2002, approximately 109,000 ADSL subscriptions were regis-tered, and 1.3 million accesses were prepared for ADSL. Thisresulted in 58% coverage nationwide and more than 90% in thelargest towns. The corresponding figure for ISDN is 99%.

There has also been a sharp increase in the number of operatoraccesses, from 12,000 at the end of 2001 to 49,000 at the endof 2002. Approximately 70% of these accesses are used forADSL. The number of leased lines was approximately 78,000. Tostrengthen customer awareness, all products aimed at opera-tors and service providers have been brought together under

the brand name Jara. Enquiries and orders are to an increasingextent made electronically through Jara Netbusiness.[See also Financial review pp. 59–61]

0 5,000 10,000 15,000 20,000

16,610

18,704

19,560

17,960

15,527’02

’01

’00

’99

’98

Fixed telephony in Norway; 1998–2002(minutes in millions)

0 0.5 1.0 1.5 2.0

0.75

1.23

1.59

1.77

1.83’02

’01

’00

’99

’98

ISDN access channels in Norway; 1998–2002(channels in millions)

Telenor is the leading provider of fixed line services to the Norwegian market. Steadily increasing data traffic underpins theimportance of fixed line services. Increasing network capacity and access to broadband is providing opportunities for newservices, especially in the transmission of content services to PC and TV.

Key figures, Telenor Networks; 2000–2002


Total revenues 16,488 16,568 16,685

EBITDA 5,717 5,666 5,672


Investments 1,853 3,719 3,603


employees 3,820 3,964 4,094


In 2002, Telenor Plus was the business area responsible for thedevelopment, sales and distribution of communications andcontent services in the Nordic residential market.

INTRODUCTION

Telenor Plus became a leading player within TV distribution inNorway and the Nordic market.

At the end of 2002, Telenor Plus consisted of four divisions:• Broadcast, providing TV services to Nordic households and

distribution services to broadcasters and other content andservice providers.

• Content & Interactive, responsible for developing and pro-viding interactive services, including the management ofcontent and rights, as well as administrating Telenor Plus’shareholding in Norwegian media companies.

• Internet, providing Internet access and services to the Nor-wegian and Swedish residential markets.

• Customer Services, serving Telenor’s fixed network tele-phony and Internet customers.

THE YEAR 2002

In July 2001, Telenor signed an agreement with Canal+ for thepurchase of the remaining 50.0% of Canal Digital AS. The pur-chase was finalised in June 2002, at a price of NOK 2.1 billion.An agreement for the exclusive satellite broadcasting of theCanal+ group’s TV channels in the Nordic region was alsosigned. In connection with the consolidation of Canal Digital,certain structural changes were made, including the merger ofactivities in Denmark, Norway and Sweden.

In October Telenor Plus signed an agreement for the sale of itscustomer base in Telenordia Privat AB to the Swedish compa-ny Glocalnet AB, in exchange for a 37.20% shareholding in thecompany, making Glocalnet AB the third largest telephonyand Internet service provider in the Swedish market. Thetransaction is conditional upon the approval of the Swedishauthorities.

VALUE CREATION

In 2002, Telenor reinforced its position as the largest providerof TV services to the Nordic residential market, both asregards the number of paying subscribers and the extent ofcoverage. At the same time, the company is the Nordicregion’s largest provider of transmission services to broad-casters. At the end of 2002, Telenor was responsible for thedistribution, either directly or indirectly, of TV based servicesto three million Nordic households.

Telenor Plus, together with four Nordic TV companies, held theTV broadcasting rights in the Nordic region for the 2002 Foot-ball World Cup. With this move, Telenor drew attention to themarket for Pay TV, and marketed Canal Digital as a distributorof such services. In February, Telenor Plus purchased the PayTV rights to Norwegian football’s top league, and Canal Digitalobtained the rights for live coverage of the Swedish ice hockeyElite Series.

In 2002, Telenor Plus was also responsible for the broadcast-ing of the Norwegian Big Brother programmes, both via iCanaland on TV. The service functioned primarily as a test of view-ers’ interest in Internet-based payment solutions, andapproximately 50,000 transactions were made throughTelenor Mobil’s MobilHandel™. Zonavi entered into a wide-ranging agreement with the Norwegian National Lottery onthe development of interactive money games on TV, andassisted the Norwegian bank DnB with the launch of the firstTV-based interactive bank services in Norway.

TELENOR PLUS


In 2002, Telenor was the largest supplier of Internet accessvia ISDN/PSTN, ADSL and cable in the Norwegian andSwedish residential markets. High demand, and insufficientlydeveloped supply lines caused some dissatisfaction with cus-tomer services. Areas where improvement is needed havenow been identified, and these will be given special follow-upin 2003.

The childproof Internet subscription Kidsurf, and the free-of-charge service SurfeFilter, which prevents unintentionaldialling of international phone numbers from telephones andPCs, were both launched in 2002. The trend towards conver-gence between broadband Internet and other media has beenslower than previously assumed, and this activity was there-fore scaled down in 2002. However, there is continued activi-

ty in this field, particularly through Canal Digital and Telenor’sbroadband portal, iCanal.[See also Financial review pp. 61–62]

0 100 200 300 400 500 600

270

282

357

561

571’02

’01

’00

’99

’98

Cable television subscribers in the Nordic region; 1998–2002(000s)

0 100 200 300 400 500 600 700 800

352

405

506

657

738’02

’01

’00

’99

’98

DTH subscribers (satellite transmission direct toprivate subscribers in the Nordic region); 1998–2002(NOK in millions)

Key figures, Telenor Plus; 2000–2002


Total revenues 4,862 3,386 2,875

EBITDA 139 248 611

Operating profit (883) (841) 135

Associated companies (270) (547) 20

Investments 2,925 1,741 2,113


employees 1,332 1,344 1,148

Telenor is the leading provider of TV services in the Nordic market. Increased bandwidth is driving an increasing service port-folio, especially in entertainment and other content services, like Interactive TV.


In 2002, Telenor Business Solutions was the business area forcommunication and IT solutions to the Norwegian, Nordic andEuropean business markets. Telenor strengthened its positionin the Swedish business market, primarily through theacquisition of Utfors AB.

INTRODUCTION

Telenor Business Solutions attained the position of Norway’sleading supplier of ICT solutions to the business market. Theprincipal market was the Nordic region, with the main focus onmedium-sized and large businesses. Telenor Business Solu-tions developed and supplied a broad range of services withintelecoms and data communication, with the emphasis oncombining the application and communication sides, IT and IP.

As of 31 December 2002 Telenor Business Solutions consist-ed of five divisions:• Communications, which supplies access, business networks

and communication services, based on services withinadvanced networks, IP-based communication (includingVirtual Private Networks, VPN), data communication andtelephony services to the Norwegian business market,including customer contact and support services.

• Managed services, which provides operation of local net-works, applications, service integration, e-business solu-tions and consultancy work.

• Business Solutions Sweden, which provides telephony, inaddition to advanced networks, IP-based communication,data communication and application services in the Swedishbusiness market.

• Nextra International, which provides IP-based services inselected countries in Europe (Great Britain, the CzechRepublic, Slovakia, Hungary, Austria and Italy) under thetrademark Nextra.

• Comincom/Combellga, which provides telecommunicationservices to the Russian market, primarily in the Moscow andSt Petersburg regions.

On 1 January 2003, as a result of the restructuring of Telenor,the responsibility for the activities in Communications,Managed services, Business Solutions Sweden and Comin-com/Combellga was transferred to the business area TelenorNetworks, and Nextra International was transferred to Otheractivities. The activities in all the units will be continued.

In the second half of 2002, Telenor Business Solutions sepa-rated Software Services from Communications, and restruc-tured the Managed Services division.

THE YEAR 2002

As of 1 January 2002, Telenor Business Solutions gathered allits activities in Sweden in Telenor Business Solutions AB. Theposition in the Swedish market was further strengthened byacquisitions in 2002: In November Telenor Business Solutionssigned an agreement to become the principal shareholder inthe Swedish data communication company Utfors AB, at atotal cost of SEK 264 million, for 90% ownership plus 2% inconvertible bonds. Parallel to this, Telenor Business SolutionsAB was sold to Utfors AB for a further 4.1% ownership in theform of convertible bonds. The new company, Telenor Busi-ness Solutions AB, has become a primary challenger in themarket for business communication in Sweden.

In Nextra International, the operations in the Czech Republicand Slovakia merged. The activities in the UK changed namefrom Nextra to Telenor Business Solutions. On 30 December2002 an agreement was signed for the sale of the HungarianNextra to the management of that company. The transactionwas executed in January 2003. The strongest growth in 2002came in Russia, where Comincom/Combellga strengthenedits position in existing markets and prepared for regionalexpansion.

VALUE CREATION

In April, Telenor Business Solutions entered into agreementswith Orkla ASA and Carlsberg Breweries A/S for the supply offixed and mobile telephony services to the group’s companiesin Scandinavia, worth approximately NOK 300 million. In July,two major agreements were signed in Norway: with NordeaBank Norge ASA for the supply of telephony and customercontact services to the tune of NOK 60 million, with the PublicRoads Administration (Norway) for the supply of networks fordata communication and operation of IT services worth NOK134 million.

In Sweden, an agreement was signed for a total solution forfixed telephony and mobile services covering 28 of Skånes’ 33municipalities, worth SEK 150 million. In December, a three-year agreement was signed via Utfors, with the possibility fora two-year extension, with the Labour Inspection Authority inSweden for a data communication solution covering approxi-mately 600 IP portals. The agreement has a turnover ofapproximately SEK 120 million during its maturity.

TELENOR BUSINESS SOLUTIONS


In line with international developments, the year 2002 wascharacterised by low investment activity and lengthy deci-sion-making processes. Within telecommunication productssuch as ADSL, data communication and IP VPN, the marketswere characterised by a good steady demand. This also had aneffect on the results of Telenor Business Solutions, wheremanaged services and outsourcing activities suffered consid-erable losses, while the Communications division experienceda relatively positive and stable market.

In 2002, Telenor Business Solutions launched the IT platformeRAF for the Telenor centre at Fornebu, a solution which hassince also been adopted in other parts of the organisation. Thesolution, called Telenor Arena, will be marketed in 2003 as acomplete modular business solution. The product ‘WirelessZone’, which is a secure Wireless Local Area Network (WLAN)was introduced to the business market. This solution suppliesemployees, customers and partners wireless access to Inter-

net and e-mail services through a secure, encoded logonfunction.

The results from Telenor Business Solutions were considerablybetter in 2002 than in 2001. [See also Financial review pp. 63-64]

Telenor develops advanced communications solutions for the business market. Telenor specialises in solutions allowing largecompanies to connect multiple components in seamless networks. The Telenor Arena model provides maximum flexibility andmobility by utilising mobile network solutions.

Key figures, Telenor Business Solutions; 2000–2002



EBITDA 26 (828) (600)

Operating profit (1,807) (2,968) (1,173)

Associated companies 1 (874) (69)

Investments 1,104 1,572 4,664


employees 3,886 4,225 3,992


Telenor has substantial activities outside the four businessareas, also including various staff and support functions: EDBBusiness Partner, Telenor Satellite Networks, Telenor SatelliteServices, Teleservice, Telenor R&D, Telenor Key Partner, TelenorEiendom and Telenor Venture.

EDB BUSINESS PARTNER ASA

EDB Business Partner ASA is one of the Nordic region’s leadingIT groups, with a turnover in 2002 of NOK 4.3 billion and close to2800 employees. EDB Business Partner is a supplier of softwaresolutions and offers consultancy and management serviceswith special expertise in telecoms, banking and finance. Thegroup is a major player in the Norwegian market, and hasactivities in the US, Sweden, the UK, Benelux, Switzerland,France, Spain, Poland and Hungary. At the close of 2002, Tele-nor had a 51.8% ownership share in EDB Business Partner ASA.

TELENOR SATELLITE NETWORKS

Telenor Satellite Networks is fully owned by Telenor. The com-pany supplies satellite-based communications solutions andVSAT technology to the business markets and national andinternational organisations in Europe, the Middle East andAfrica. The company’s complete communications solutionsencompass network design, implementation, managementand service. The services are supplied via subsidiaries in Nor-way, the Netherlands, Poland, Slovakia and the Czech Republic.

TELENOR SATELLITE SERVICES

Telenor Satellite Services is fully owned by Telenor. The com-pany supplies satellite-based speech and data services foruse on land, in the maritime industry and in aviation. Subse-quent to the acquisition of Telenor Satellite Services Inc. (for-merly COMSAT Mobile communications) in January 2002 andMarlink (formerly Sait Communications) in March 2001,Telenor Satellite Services has become one of the world’s lead-ing suppliers of global, mobile communications solutions viasatellite. The services are marketed through a broad interna-tional chain of distributors as well as from own offices aroundthe world.

TELESERVICE AS

Teleservice AS is fully owned by Telenor. The company isresponsible for Directory Enquiries 1881 (Opplysningen 1881),International Directory Enquiries 1882, MeetAt 119 (telephoneand data conferences) and other Contact Centre services. Thecompany aims to make information and communication serv-ices easily accessible to users. In February 2002, the marketfor directory enquiries was opened to competition in Norway,but Directory Inquiries 1881 is still the dominant player in theNorwegian market with 75% of the traffic.

TELENOR FORSKNING OG UTVIKLING (R&D)

Telenor Forskning og Utvikling is Norway’s largest researchenvironment in the field of ICT technology. Activities comprisetechnology, services and markets. In 2002, R&D participatedin 33 international projects, most of them under the directionof the EU or EURESCOM, Telenor’s R&D commitments arefocused around two main areas: future broadband networksand future mobile systems.

TELENOR VENTURE AS

Telenor Venture AS is seeking to create value through activeownership in companies in the areas of telecommunicationsand IT. A new company, Telenor Venture II ASA, was estab-lished in September 2000 with the purpose of continuing andexpanding the investments activities, and in December 2002,Telenor Venture III was established, to continue activities for-merly organised under Telenor Innovasjon AS and other partsof the Telenor group. Telenor’s ownership share in TelenorVenture is 63.7%, in Telenor Venture II ASA the ownershipshare is 50.1% and in Telenor Venture III it is 100%. The TelenorVenture companies are managed and administered byTeleVenture Management AS in which Telenor has a ownershipshare of 23.9%.

TELENOR KEY PARTNER AS

Telenor Key Partner AS is fully owned by Telenor. The compa-ny supplies technology-based administrative services withineconomy, personnel and communication to the group’s busi-ness areas and subsidiaries. Telenor Key Partner shall be adriving force in achieving standardisation and qualityimprovements in the administrative running of the wholegroup. All services shall be based on viable business principlesand have market-oriented prices.

TELENOR EIENDOM HOLDING AS (PROPERTY

MANAGEMENT)

Telenor Eiendom Holding AS is fully owned by Telenor and wasset up as a private limited company in 2002, as a continuationof Telenor Communication AS. At the close of 2002, TelenorEiendom Holding AS managed close to 1.1 million sq. meters ofowned and leased floor space spread out over approximately4500 buildings. The company’s main task is to ensure that theTelenor group has at its disposal sufficient premises to allowits main activities to be performed in a cost effective manner.

OTHER ACTIVITIES


The accounts The financial statments for the TelenorGroup show a growth in revenues excluding gains of 20%to NOK 48.7 billion in 2002. In 2002, the Group reporteda net loss due to expenses for restructuring and write-downs, as opposed to large sales gains in 2001. In 2002,Telenor had an underlying growth and realizedsignificant cost reductions.

CONTENT

Financial review 50

Financial statementsStatement of profit and loss – Telenor Group 72

Balance sheet – Telenor Group 73

Cash flow statement – Telenor Group 74

Shareholders equity – Telenor Group 75

Significant accounting principles – Telenor Group 76

Notes to the financial statements – Telenor Group 80

Financial statements incl. notes – Telenor ASA 120

Auditor’s report 131

Statement from the corporate assembly of Telenor 131

FINANCIAL REVIEW

The following discussion should be read in conjunction with the consoli-

dated financial statements, which have been prepared in accordance

with Norwegian GAAP, which differ in certain respects from US GAAP. For

a reconciliation of the material differences between Norwegian and US

GAAP, see note 31 to the consolidated financial statements.

Telenor has implemented changes in the business area structure effec-tive from 1 January 2003, as described in note 3 to the consolidatedfinancial statements. The discussion below reflects the business areastructure in 2002.The discussion is mainly on 2002 compared to 2001.For a full discussion on 2001 compared to 2000 you should read theannual report for 2001 or Telenor’s annual report on Form 20-F.

RESULTS OF OPERATIONS – GROUP

Revenues

External revenues excluding gains on disposal of fixed assets and oper-ations increased by 19.9% in 2002 compared to 2001. In 2002, 39% ofexternal revenues derived from Mobile, compared to 27% in 2001. Theformerly associated companies, DiGi.Com, which was consolidatedfrom 1 September 2001, Pannon GSM, which was consolidated from 4February 2002, and Kyivstar, which was consolidated from 1 Septem-ber 2002, generated 87% of the increase in Mobile’s external revenues.Telenor’s mobile operations both in Norway and outside Norwayshowed a healthy growth. Networks' external revenues decreasedcompared to 2001, due to reduced traffic as a result of transition toADSL, migration of fixed traffic to mobile traffic and internal pre-selec-tion traffic, where external revenues are reported in Plus and BusinessSolutions. The increase in Plus' external revenues was mainly due tothe consolidation of Canal Digital from 30 June 2002, increased sale ofADSL and pre-selection traffic (Internet). The decrease in BusinessSolutions' external revenues related primarily to the weak market foroperating services and software. External revenues in EDB BusinessPartner showed a marginal increase due to the effect of acquired busi-nesses in its Operating area, while the underlying development wasnegative due to weak market conditions. The increase in external rev-enues for other business units was due to the acquisition of businessesin Satellite Services and increased sales in Satellite Networks, offset inpart by decreased revenues from the former subsidiary Itworks.

The table below shows consolidated revenues broken down by opera-tions in and outside Norway. Telenor’s proportional share of revenuesfrom the associated companies and joint ventures are not included inthe consolidated revenues. Many of the international operations arecarried out in associated companies and joint ventures, especiallymobile operations. The revenues in the table for consolidated compa-nies are based on company location and do not include gains on dis-posal of fixed assets and operations.

(NOK in millions) 2002 2001 2000

Consolidated revenues

Norway 33,085 34,032 33,197

Outside Norway 15,583 6,572 3,333

Total revenues excluding gains 48,668 40,604 36,530

Gains on disposal of fixed assets and operations in 2002 were dueprimarily to the sale of properties and some operations in Corporatefunctions and Group activities. Gains on disposal of fixed assets andoperations in 2001 were primarily related to the sale of Telenor Mediawith a gain of NOK 5,000 million, the sale of the subsidiary NorcomNetwork Communication Inc. with a gain of NOK 259 million and sale ofproperties.

Operating expenses

Please see the notes to the consolidated financial statements forfurther specification of the operating expenses.

Cost of materials and traffic charges (see note 4) Traffic charges –network capacity consist mainly of traffic charges for providing fixedand mobile services, primarily in the Mobile, Networks and BusinessSolutions business areas. The increase in network capacity costs in2002 compared to 2001 was due primarily to consolidation of formerlyassociated companies in Mobile and Business Solutions in 2001 and2002. Traffic charges – satellite capacity are related to sales of Satel-lite Mobile services, that are part of Satellite Services, and satellitebroadcasting services, that are part of Plus. The increase in satellitecapacity costs was due to the acquisition of COMSAT Mobile Communi-cations (included in Telenor Satellite Services Inc.) in 2002. Cost ofmaterials etc. were incurred in all business areas. In particular, Mobileand Plus in the aggregate generated approximately two-thirds of thetotal cost of materials in 2002, due primarily to sales of customerequipment in Mobile and TV-program fees in Plus. The increase in costof material etc. was due primarily to Pannon GSM and Canal Digital,which was consolidated during 2002, and more than offset thedecrease due to the sale of the former subsidiary Telenor Media in2001 and the bankruptcy of Itworks in 2002. Adjusted for acquisitionand disposal of companies, all business areas showed a decrease incost of materials etc. in 2002, due primarily to a decrease in sales ofequipment.

Own work capitalized (see note 5) Own work capitalized ispresented as a separate caption and is not netted against the relatedexpenses in the profit and loss statement. The various Groupcompanies consolidated in Telenor perform work on their own long-lived assets, which is capitalized, if appropriate. The Group companiesexpense the related costs in the line items cost of materials, salariesand personnel costs, or other operating expenses as appropriate. Thecosts that are capitalized are then reversed as change in own workcapitalized. Several companies in the Group perform work on anddeliver long-lived assets to other Group companies. These long-livedassets are capitalized by the purchasing company. For the Group as awhole this is regarded as a change in own work capitalized and theexpenses recorded in the selling companies are reversed as a changein own work capitalized for the Group. The decrease in 2002 comparedto 2001 was due to the lower level of investments.

Salaries and personnel costs (see note 6 and 7) The decrease inthe salaries and personnel costs in 2002 compared to 2001 was dueprimarily to the disposal of certain businesses, especially TelenorMedia, Itworks and companies in Nextra International. This was offsetby the consolidation of formerly associated companies as well as theacquisition of COMSAT. Adjusted for acquisition and disposal of compa-nies, total salaries and personnel costs were in line with 2001. Therewas a decrease in activities, especially in EDB Business Partner, Busi-ness Solutions and Teleservice due to weak market conditions. Thisdecrease was partly offset by wage inflation. In 2002, Telenor startedimplementing a program to improve operational efficiency, Delta 4.During 2002, particularly at the end of the year, certain employeeswere offered voluntary termination. Many of these employees werestill employed as of 31 December 2002. As a result, although thisdecrease in the number of employees had some effect on salaries andpersonnel costs in 2002, the effect is expected to be more significantduring 2003. Expenses for workforce reduction are recorded as a partof “Other operating expenses” and are not included in salaries and per-sonnel costs.


The number of full-time equivalent employees at 31 December 2002increased by approximately 1,100 compared to December 31, 2001, dueto consolidation of companies. The average number of full-time equiv-alent employees was higher in 2002 than for 2001. The consolidationof Pannon GSM as of 4 February 2002, Canal Digital as of 30 June2002 and Kyivstar as of 1 September 2002 increased the total numberof the full-time equivalent employees by approximately 2,700.

Pension costs, including social security tax, increased in 2002 com-pared to 2001, primarily as a result of a one time NOK 82 million effectrelated to the accounting of previously granted pension benefits inTeleservice and Networks, an increase in salaries that was higher thanestimated, increased interest cost and increased amortization of actu-arial losses. Actuarial losses have increased in the course of the lastthree years mainly due to the reduction in the discount rate imple-mented as of 31 December 1999, as well as lower actual return on planassets than estimated resulting from the reduction in share prices inthe course of the last three years. In addition, salary increases andpensions adjustments, which were higher than originally estimated,contributed to an increase in actuarial losses. Pension costs includingsocial security tax may continue to increase in the future due to highactuarial losses which are not reflected in the balance sheet or in theprofit and loss statement. You should read note 7 to the consolidatedfinancial statements for additional information about pension costs.

Other operating expenses (see notes 8 – 11) Other operatingexpenses increased by approximately NOK 0.8 billion, or 6.4%, in 2002compared to 2001. Adjusted for the increased costs for workforcereductions, loss contracts and exit from activities of approximatelyNOK 0.4 billion and the net increase of approximately NOK 1.4 billionrelated to companies acquired and disposed of (excluding costs forworkforce reductions, loss contracts and exit from activities), operatingexpenses decreased by approximately NOK 1 billion. In 2002, Telenorbegan implementing a program to improve operational efficiency,Delta 4, which contributed to reducing other operating expenses, inparticular consultancy fees, external personnel and travel costs. In2002, Telenor incurred expenses related to workforce reductions, losscontracts and exit from activities of NOK 982 million, an increase ofNOK 357 million compared to 2001. Of the amount expensed in 2002,approximately NOK 0.7 billion was related to workforce reduction, andNOK 0.2 billion was related to loss contracts, especially property leas-es. You should read note 11 to the consolidated financial statements foradditional information about costs for workforce reductions, loss con-tracts and exit from activities.

Reduced costs for cost of premises, vehicles and office equipment in2002 compared to 2001 was due to the replacement of leased proper-ties with owned properties, especially Telenor’s new headquarters atFornebu outside of Oslo, and lower activity in some areas. This was part-ly offset by the effect of consolidating additional companies in Mobile.

Increased operation and maintenance expenses in 2002 compared to2001 was related to new companies in Mobile and new operations inEDB Business Partner.

Telenor’s total marketing, sales commissions and advertising expensesincreased by NOK 0.6 billion in 2002 compared to 2001 due to the neteffect of companies acquired and disposed of, especially Pannon GSM,DiGi.Com, Kyivstar and Canal Digital. Adjusted for these companies,there was a reduction in these expenses mainly in Mobile in Norwaydue to lower sales of new subscriptions and lower level of sales com-mission per subscription, as well as lower marketing activity and

reduced activity in Nextra International in Business Solutions. Market-ing, sales commissions and advertising related to ADSL increased.Approximately NOK 0.2 billion of the increase in concession fees in2002 compared to 2001 related to DiGi.Com and Pannon GSM.

Loss on disposal of fixed assets and operations Losses on disposalof fixed assets and operations was for 2001 primarily related to discon-tinuance of equipment and sale of properties, and in 2002 Telenor alsoincurred losses in connection with the sale of companies in BusinessSolutions and the bankruptcy of the former subsidiary Itworks AS.

Depreciation, amortization and write-downs


Depreciation of tangible assets 8,272 6,266 5,201

Amortization of goodwill 1,002 668 496

Amortization of other intangible assets 962 317 124

Total depreciation and amortization 10,236 7,251 5,821

Write-downs of tangible and

other intangible assets 921 1,556 113

Write-downs of goodwill 2,632 2,266 -

Total write-downs 3,553 3,822 113

Total depreciation, amortization and

write-downs 13,789 11,073 5,934

Specification of amortization of goodwill and other intangible assets(NOK in millions) 2002 2001 2000

DiGi.Com 304 115 -

Pannon GSM 765 - -

Kyivstar 87 - -

Other Mobile 58 38 72

Total Mobile 1,214 153 72

Software licenses 134 155 72

Other Business Solutions 186 274 174

Total Business Solutions 320 429 246

Canal Digital 108 - -

Other Plus 91 70 37

Total Plus 199 70 37

EDB Business Partner 169 196 152

Other 62 137 113

Total 1,964 985 620

Specification of write-downs (NOK in millions) 2002 2001 2000

Mobile 2,289 22 34

Networks 18 570 14

Plus 135 494 12

Business Solutions 734 1,110 5

EDB Business Partner 364 1,262 1

Other 13 364 47

Total 3,553 3,822 113

Depreciation of tangible assets increased by approximately NOK 2 billionin 2002 compared to 2001. Mobile contributed with approximately NOK1.2 billion of the increase, due primarily to the consolidation of formerlyassociated companies. Canal Digital contributed with NOK 147 million.Shortened depreciation periods from 1 April 2001 for some fixed assets inthe Norwegian fixed and mobile networks also increased depreciation byapproximately NOK 90 million in 2002 for assets acquired prior to 1 April2001. Depreciation also increased in Business Solutions by NOK 177 mil-lion, in Networks by NOK 255 million, and in Corporate functions andGroup activities by NOK 215 million, where the increase was due toTelenor’s new headquarters at Fornebu and new IT-solutions.


Telenor made significant write-downs in 2001 and 2002, mainly due toa decline in market values and depressed market conditions in some ofthe operations. In 2001 and 2002, Telenor evaluated the carryingvalues of the assets, and made the resulting write-downs based on themarket conditions and asset-specific circumstances in each period. If,among other things, market values continue to decline and marketconditions continue to deteriorate, Telenor may have to continue toperform impairment tests, as well as the annual impairment test ofgoodwill according to US GAAP. You should read “Other Issues –Critical accounting policies under Norwegian GAAP and estimates” foradditional information on Telenor’s impairment tests.

Of the total write-downs in 2002, NOK 2,138 million was goodwill relat-ed to DiGi.Com as a result of continued low publicly quoted shareprices. The write-down was based on the publicly quoted share price at31 December 2002, adjusted to reflect a control premium.

In connection with the integration of the operating service business inBusiness Solutions with the internal IT operating environment, Telenordecided to reduce the number of operating platforms and focus theactivity of the operations. Telenor also considered the sales potentialfor CA-software and the value of service contracts, platforms andequipment. Furthermore Telenor evaluated goodwill related to theremaining Nextra International companies. Based on these evalua-tions, Telenor wrote down fixed assets goodwill and other intangibleassets in Business Solutions by a total of NOK 734 million in 2002.

In 2002, goodwill in EDB Business Partner related to the Banking &Financing area and Consulting area was written down by NOK 356million based on discounted cash flows.

The write-downs in Plus in 2002 primarily related to the lower demandin the SMATV market in Denmark and Sweden, delayed commercialisa-tion of new broadcasting standards, as well as reduced expectationsfor the use of interactive TV as a payment facility.

Operating profit (loss)

Operating loss in 2002 was NOK 320 million, compared to an operatingprofit of NOK 3,177 million in 2001. The operating loss in 2002 was dueprimarily to write-downs of NOK 3,553 million, compared to NOK 3,822million in 2001, and expenses for workforce reductions, loss contracts,exit from activities and previously granted pension benefits in Teleser-vice, totalling NOK 1,048 million, compared to NOK 625 million in 2001.In 2001, Telenor also recorded net gains on disposal of fixed assets andoperations totalling NOK 5,373 million, of which NOK 5,000 million wasrecorded in Corporate functions and Group activities as a result of thesale of Telenor Media, and NOK 259 million was recorded in Mobile as aresult of to the sale of Norcom Networks, compared to NOK 11 million in2002. The following table shows the breakdown of expenses for work-force reductions, loss contracts and exit from activities by businessarea. This table and the table showing the breakdown of write-downsunder “Depreciation, amortization and write-downs” explain in part thedevelopment in operating profit in each business area.


Expenses for workforce reductions, loss

contracts and exit from activities

Mobile 120 - -

Networks 161 - -

Plus 92 49 (40)

Business Solutions 88 229 -

EDB Business Partner 111 170 -

Other 1) 476 177 30

Total 1,048 625 (10)

1)This line item corresponds to the same line item in “other operating expenses”,

except for 2002, where NOK 66 million related to previously granted pension

benefits in Teleservice is included in “salaries and personnel costs”.

The following discussion of Telenor’s operating profit excludes theeffect of write-downs and expenses for workforce reductions, loss con-tracts and exit from activities, as well as net gains on disposal of fixedassets and operations. Excluding these effects, adjusted operatingprofit increased by NOK 2,019 million, or 90%, to NOK 4,270 million in2002. A substantial portion of this increase resulted from the Mobilebusiness area, due to a healthy growth and a positive effect of the con-solidation of formerly associated companies during 2001 and 2002.Adjusted operating profit in the Networks business area decreased mar-ginally compared to 2001 due to higher depreciation which offset theeffects of other cost reductions. Adjusted operating profit in the Plusbusiness area decreased mainly due to expenses related to the sales ofADSL and the operating loss due to the consolidation of Canal Digital(approximately NOK 185 million, including amortization of net excessvalues). Adjusted operating profit in Business Solutions increased dueprimarily to the sale or termination of loss-generating companies inNextra International. EDB Business Partner’s adjusted operating profitdecreased due to weaker market conditions and adjusted operatingprofit from Other Business Units increased mainly due to the effect ofbusinesses acquired or disposed of. In 2001, Telenor Media was sold andthe operating profit in Telenor Media for the period on the date of thedisposal of the company was NOK 262 million.

Associated companies


Telenor's share of: 1)

Net income (loss) 341 (318) (1,086)

Amortization of Telenor's net excess values (862) (1,427) (776)

Write-downs of Telenor's excess values (1,965) (11,597) -

Gain on disposal of ownership interests 36 21,579 1,170

Net result from associated companies (2,450) 8,237 (692)

(1 The figures are partly based on the management's estimates in connection

with the preparation of Telenor’s consolidated financial statements. Telenor’s

consolidated profit and loss statement contains only the line item"net result

from associated companies". Telenor’s share of the other items shown in the

table are not included in the consolidated financial statements, but this

information is set forth in note 1 6 to the consolidated financial statements.

Net excess values are the difference between Telenor’s acquisition cost and

Telenor’s share of equity at the time of the acquisition of the associated com-

panies.

The results from associated companies were influenced by the acquisi-tions, disposals and consolidation of subsidiaries in 2000, 2001 and2002 and by write-downs in 2001 and 2002. Bravida became an asso-ciated company as of 1 November 2000. DiGi.Com was consolidated asa subsidiary as of 1 September 2001, Telenordia was consolidated as a


subsidiary as of 1 October 2001, Pannon was consolidated as a sub-sidiary as of 4 February 2002, Canal Digital was consolidated as a sub-sidiary as of 30 June 2002 and Kyivstar was consolidated as subsidiaryas of 1 September 2002. VIAG Interkom and Esat Digifone were sold atthe beginning of 2001. Extel was sold at the end of 2002 and StavTele-Sot at the beginning of 2003 to VimpelCom-Region.

Net income in 2002 also reflects a write-down of OniWay of NOK 316million recorded at the end of 2002. The net effect of companies thatwere consolidated during 2001 and 2002 was an increase in netincome from associated companies in 2002 compared to 2001. Apartfrom the effect of associated companies acquired, sold or consolidatedas subsidiaries, there was underlying growth in the results of most ofthe associated mobile companies, especially Vimpelcom, Cosmote andConnect Austria.

Decreased amortization of net excess values in 2002 compared to2001 was due to companies which were consolidated during 2001 and2002, as well as to the effect of write-downs in 2001. Write-downs ofnet excess values in 2002 were mainly related to Sonofon, with NOK1,000 million, and DTAC/UCOM, with NOK 881 million. During 2002, themarket values of mobile companies continued to decline and the write-downs, both in 2002 and 2001, were made on the basis of discountedcash flows and comparison to the value of similar companies, in thecase of Sonofon, and quoted share prices in the case of DTAC/UCOM.You should read “– Other Items – Critical accounting policies underNorwegian GAAP and estimates” for additional information about thewrite-downs. Gains on disposal in 2002 related to the sale of Extel.

Write-downs in 2001 related primarily to Sonofon and Telenordia as of30 June (NOK 7,500 million and NOK 665 million, respectively) andDTAC/UCOM as of 31 December (NOK 3,400 million).

Telenor sold the ownership stakes in VIAG Interkom and Esat Digifone in2001, with a combined gain before taxes of NOK 21.4 billion in 2001. Thesale of Ephorma AS and European Medical Solutions Group AS by EDBBusiness Partner contributed a combined gain of NOK 141 million in 2001.

Financial income and expenses (see note 12)

The reduction in total financial income in 2002 compared to 2001 wasmainly related to reduced interest income on investments in interest-bearing financial assets. In 2001, a portion of the proceeds from the largedisposals was held in liquid assets in anticipation of payment of invest-ments and repayments of liabilities. The satellite organizations wereincorporated in 2000 and 2001, and distributed no dividends in 2002.

The increase in total financial expenses in 2002 compared to 2001 wasdue to increased interest bearing liabilities and higher average interestrates. At the beginning of 2002, Telenor’s interest bearing liabilitiesincreased significantly due primarily to the acquisition of Pannon GSM.At the end of 2002, interest bearing liabilities increased by NOK 2.4billion due to a tax claim regarding the sale of Sonofon Holding A/Sand by NOK 0.5 billion due to a judicial proceeding in Greece. Telenorexpensed interest of approximately NOK 160 million on these claims in2002. A guarantee for the tax claim of NOK 2.4 billion has been provid-ed and, as a result of the decision to expense the tax claim at the endof 2002, Telenor expect to continue to expense a 12% interest inarrears on the tax claim for as long as the guarantee remains out-standing. Increased average interest rates compared to 2001 were dueto financing activities by some subsidiaries, which have their ownexternal financing, while the average interest rates for financingthrough the parent company were reduced slightly. Capitalized interest

decreased in 2002 compared to 2001 due to the lower level of invest-ments in Telenor’s fixed network in Norway and the completion of thenew headquarters at Fornebu outside of Oslo.

Net foreign currency losses in 2002 were primarily related to currencyhedging of the purchase price for the shares in Pannon GSM in Euro,accounts receivable in foreign currency and interest bearing liabilitiesin consolidated entities abroad. Hedge accounting is not permitted forcurrency hedging of forecasted equity investments, as Pannon GSM.The value of the Euro relative to the Norwegian Kroner decreasedbetween the execution of the hedging transaction and its settlementand a foreign currency loss was accordingly recorded in connectionwith the hedging transaction. The reported investment amount forPannon GSM in Norwegian Kroner was reduced correspondingly.

The loss and write-down of financial assets related mainly to the write-down of the shares in Inmarsat, New Skies, Sponsor Service ASA andVenture companies in addition to NOK 78 million in capital contributionto Telenor Pension fund written down to the book value of the equity inthe Fund. The Inmarsat shares are valued in U.S. Dollars and the writedown of NOK 422 million was a result of the weakening of the U.S. Dol-lar against the Norwegian Kroner during 2002. The shares in New Skieswere written down by NOK 94 million to the current quoted marketprice as of 31 December 2002, due to a significant decline in the pub-licly quoted share price. Sponsor Service ASA filed for bankruptcy inthe beginning of 2003, and a loss of NOK 66 million was recognised in2002. In 2002, Telenor realized small gains and losses on shares com-pared to previous years.

Income taxes (see note 13)

The corporate income tax rate in Norway is 28.0%. In 2002, a lossbefore taxes and minority interests and a tax income was recorded.Telenor’s effective tax rate (income taxes as a percentage of profitbefore taxes) was 38.0% in 2001 and 43.0% in 2000. The main itemsaffecting Telenor’s income taxes are discussed in note 13 to the finan-cial statements.

Prior to the IPO in December 2000, a new parent company for the Group(Telenor ASA) was incorporated and all shares in Telenor AS were con-tributed to Telenor ASA as an in kind contribution. At the same time,Telenor AS changed its name to Telenor Communications AS and in 2002to Telenor Eiendom Holding AS. The tax cost base of the Telenor EiendomHolding AS shares equaled estimated fair value at the time when the inkind contribution was made. As a necessary part of the overall restruc-turing of the Telenor Group, in 2001 and 2002 Telenor demerged or soldentities from Telenor Eiendom Holding AS to holding companies for thedifferent business areas. To the extent Telenor ASA should dispose ofshares in Telenor Eiendom Holding AS, or dispose of shares in entitiesdemerged from Telenor Eiendom Holding AS, any taxes will be computedon the difference between the consideration received and the high taxbase cost, as established through the in kind contribution.

Minority interests

See the consolidated statement of shareholders equity. The minori-ty part of net income for EDB Business Partner for 2001 and 2002 wasaffected by amortization and write-downs of net excess values of NOK328 million and 295 million, respectively. The net excess values arosemainly in 1999 and 2000 in connection with Telenor’s purchase of EDBASA and the decrease in the ownership interest in EDB Business Part-ner, where the minority interests were recorded at fair value, which wasin excess of book value of the minority’s part of equity in EDB BusinessPartner.


RESULTS OF OPERATIONS BY BUSINESS AREA

The following tables sets forth selected financial data for the businessareas for the period 2000–2002.


Revenues excluding gains on disposal of

fixed assets and operations

Mobile 20,346 12,299 9,776

Networks 16,487 16,562 16,365

Plus 4,851 3,374 2,862

Business Solutions 6,157 5,940 4,316

EDB Business Partner 4,338 4,770 3,944

Other business units 3,978 4,033 4,029

Corporate functions and Group activities 2,707 2,774 3,152

Media1) - 1,338 1,655

Bravida2) - - 4,222

Eliminations (10,196) (10,486) (13,791)

Total revenues excluding gains 48,668 40,604 36,530

Gains on disposal of fixed assets

and operations 158 5,436 1,042

Total revenues 48,826 46,040 37,572



Mobile 1,414 2,495 1,594

Networks 2,526 2,175 3,047

Plus (883) (841) 135

Business Solutions (1,807) (2,968) (1,173)

EDB Business Partner (409) (1,208) 201

Other business units (90) (686) (181)

Corporate functions and Group activities (1,185) 4,139 16

Media1) - 262 301

Bravida2) - - (9)

Eliminations 114 (191) (302)

Total operating profit (loss) (320) 3,177 3,629

1) 9 months in 2001 . 2) 1 0 months in 2000.

TELENOR MOBILE


External revenues

mNorway 9,441 8,746 8,244

Pannon GSM 4,502 - -

DiGi.Com 2,702 901 -

GrameenPhone 1,589 1,185 537

Kyivstar 708 - -

Other units in Mobile 137 169 143

Total external revenues 19,079 11,001 8,244

Internal revenues 1,267 1,298 1,532

Gains on disposal of fixed assets and

operations - 259 23

Total revenues 20,346 12,558 9,799

Total operating expenses 18,932 10,063 8,205


Associated companies (2,030) 9,677 (460)

Net financial items (2,050) (496) (821)

Profit before taxes and minority interests (2,666) 11,676 313

Reconciliation of EBITDA to operating profit

EBITDA 7,482 4,067 2,720

Depreciation, amortization and write-downs 6,068 1,572 1,126


EBITDA /total revenues 37% 32% 28%

Operating profit/total revenues 7% 20% 16%

Investments:

– Capex 3,731 2,716 1,978

– Investments in businesses 8,894 4,495 30,865

Total full-time equivalent employees

(period end) 6,551 4,217 2,481

– Of which outside Norway 4,673 2,084 531

The Mobile business area’s results in 2002 and 2001 were affected bythe consolidation of:

• Kyivstar as a subsidiary effective from 1 September 2002 whenTelenor increased the ownership interest in the Ukraine operator from45.4% to 54.2%.

• Pannon GSM as a subsidiary effective from 1 February 2002 whenTelenor increased the ownership interest in the Hungarian operatorfrom 25.8% to 100%.

• DiGi.Com as a subsidiary effective 1 September 2001 when Telenorincreased the ownership interest in the Malaysian operator from32.9% to 61.0%.

In addition to the effects from the consolidation of Kyivstar, PannonGSM and DiGi.Com, there was an underlying growth in revenues withouta corresponding growth in expenses in all companies. This contributedto an increase in operating profit before amortization, depreciation andwrite-downs (referred to as EBITDA) in 2002 compared to 2001, whileamortization and depreciation increased, mainly due to consolidationof these companies. The reduction in operating profit compared to2001 was due to the write-down of goodwill by NOK 2.1 billion relatedto DiGi.Com.

An increasing proportion of Telenor’s revenues and profits (losses) arederived from our international mobile operations and investments.Fluctuations in currency exchange rates between the Norwegian Kro-ner and the functional currencies of the international mobile sub-


sidiaries and associated companies could affect the reported earningsand the value in Norwegian Kroner of the investments. For example, in2002 the significant strengthening of the Norwegian Kroner had anadverse effect on the results of operations and the values of theinvestments reported in Norwegian Kroner of the mobile subsidiariesDiGi.Com (Malaysia), Kyivstar (Ukraine) and GrameenPhone(Bangladesh), respectively.

Telenor Mobile – mNorway


External revenues

Mobile outgoing traffic 3,880 3,500 3,104

Mobile incoming traffic 389 392 289

Roaming 1,220 1,209 1,084

Total traffic 5,489 5,101 4,478

SMS/MobilInfo/CPA 1,530 1,187 792

Subscription and connection fees 1,350 1,328 1,318

Customer equipment 616 620 720

Service providers and other 456 510 257



Gains on disposal of fixed assets and operations - - -

Total revenues 10,695 10,056 9,096


EBITDA 4,330 3,731 3,181

Depreciation, amortization and write-downs 1,322 1,105 965


EBITDA/total revenues 40% 37% 35%


Capex 750 1,674 1,485


(period end) 1,713 1,825 1,754

No. of subscriptions (in thousand) 2,382 2,307 2,199

Operating profit and EBITDA – mNorway

Operating profit in 2002 was NOK 3,008 million, an increase of 14.6%compared to 2001. This includes depreciation, amortization and write-downs of tangible and intangible assets, which increased as an effectof high investments during 2001, the shortening of depreciationperiods as of 1 April 2001 and a write down related to the IT-systemsportfolio in 2002. Operating profit before depreciation, amortizationand write-downs (EBITDA) increased in 2002 compared to 2001 due tochange in the revenue mix, with a larger share of the revenues beinggenerated from higher margin products. Adjusted for expenses of NOK104 million for workforce reductions in 2002, other operating expenseswere reduced as an effect of cost reduction actions through 2002.

Revenues – mNorway

Telenor’s market share for GSM subscriptions at 31 December 2002was 61%, at the same level as at 31 December 2001. During the same period, the estimated mobile penetration in Norwayincreased from 80% to 84%.

In 2002, increased external revenues from outgoing mobile traffic inNorway were due primarily to the increase in the number of subscrip-tions and to the increase in traffic generated on average by each sub-scription.

Increased traffic per subscription and a higher number of text mes-

sages more than offset the price reduction in incoming traffic, whichled to an increase in the average monthly revenue per subscription(ARPU) in 2002.

External revenues from incoming mobile traffic in 2002 were in linewith 2001 due primarily to an increase in volume, which offset the pricereduction effective from 5 May 2001.

External revenues from roaming remained stable despite an increase involume generated by Norwegians abroad due to the strengthening ofthe Norwegian Kroner.

The increase in external revenues from SMS and Content ProviderAccess was due to a higher number of messages and subscriptions. Thenumber of messages increased by 322 millions to 1,692 millions in2002. Revenues increased more than volume as a result of a higheraverage price in 2002 compared to 2001.

External revenues from subscription and connection fee were relativelystable due to a change in subscription mix to lower priced subscrip-tions, which was offset by the effect of a higher number of subscrip-tions.

External revenues from sales of customer equipment primarily relatedto sales of handsets and computer equipment through the wholly-owned distributors.

External revenues from service providers were stable in 2002 com-pared to 2001. Price reduction was offset by a higher number of sub-scriptions and a small increase in traffic.

Other external revenues decreased in 2002 compared to 2001 as a resultof lower sales of SIM cards to service providers and foreign operators.

Decrease in internal revenues was due to lower prices in 2002 com-pared to 2001.

Operating expenses – mNorway


External costs of materials and traffic charges 1,872 1,793 1,740

Internal costs of materials and traffic charges 722 814 743

Total costs of materials and traffic charges 2,594 2,607 2,483

Own work capitalized (52) (55) (14)

Salaries and personnel costs 1,064 976 888

Other external operating expenses 1,970 2,021 1,854

Other internal operating expenses 789 776 704

Depreciation and amortization 1,207 1,083 931

Write-downs 115 22 34

Losses on disposal of fixed assets

and operations - - -


Increased operating expenses in 2002 compared to 2001 were mainlydue to higher depreciation, amortization and write-downs, andexpenses in connection with staff reductions.

Costs of materials and traffic charges in 2002 were slightly lower thanin 2001 mainly due to reduced expenses for traffic abroad as a result ofthe strengthening of the Norwegian Kroner and lower sales of SIMcards. This was partly offset by higher traffic charges from the increasein generated traffic (voice and SMS) to subscribers in other telecomoperators’ networks.


Salaries and personnel costs increased in 2002 compared to 2001 dueto increase in salaries and number of employees.

Other operating expenses decreased in 2002 compared to 2001despite expenses for workforce reductions of NOK 104 million whichwere recorded at the end of 2002. The decrease in expenses was dueto cost reduction measures, especially reduced usage of consultantsand reduced marketing and sales commissions.

Depreciation and amortization increased in 2002 compared to 2001due to the relatively high level of investments during 2001, and theshortening of depreciation periods as of 1 April 2001. Increased write-downs in 2002 were mainly related to assets no longer in use in our IT-system portfolio.

Capital expenditure – mNorway

Capital expenditures were substantially lower in 2002 compared to2001 due to diminishing capacity and coverage investments as growthin traffic decreased.

Pannon GSM – Hungary

(NOK in millions) 20021)

2001 2000

Mobile related revenues 4,187 - -

Other revenues 318 - -

Total revenues 4,505 - -


EBITDA 1,586 - -

Depreciation, amortization and write-downs 715 - -

Operating profit 871 - -

EBITDA/total revenues 35% - -

Operating profit/total revenues 19% - -

Capex 825 - -


(period end) 1,523 - -

No. of subscriptions (100% in thousand) 2,450 - -

1) The table shows figures included in the accounts for Telenor from the date

of acquisition.

Telenor consolidated Pannon GSM as a subsidiary effective 4 February2002, when Telenor increased the ownership interest in the companyfrom 25.8% to 100%. The following discussion and analysis of PannonGSM’s results of operations is based on Pannon GSM’s financial state-ments for the years ended 31 December 2001 and 2002, as preparedby Pannon GSM, adjusted to conform materially with Norwegian GAAP.Telenor believe that such information provides a more useful measureof comparative financial performance for a period when Pannon GSMwas not yet consolidated. However, such information does not purportto represent what the actual results of operations would have been hadPannon GSM been consolidated from January 2001 and is not neces-sarily indicative of future operating results.

Operating profit and EBITDA – Pannon GSM

Operating profit increased in 2002 compared to 2001, including depre-ciation, amortization and write-downs of tangible and intangibleassets, which increased due to write-downs of outdated network ele-ments. Operating profit before depreciation, amortization and write-downs (EBITDA) increased in 2002 compared to 2001 by NOK 0.3 bil-lion due to higher traffic as a result of more subscriptions, and

increased use of text messages (SMS), which more than offsetincreased operating expenses. Provisions of NOK 56 millions weremade in 2002 for the estimated effect of charges related to introduc-tion of Universal Service Obligation with effect from 1 February 2002.The operating profit margin increased in 2002 compared to 2001, andthe EBITDA margin increased from 35% to 36% in 2002.

Revenues – Pannon GSM

In 2002, Pannon had an 18% increase in revenues to NOK 4.9 billioncompared to 2001. This growth was primarily due to increased trafficresulting from an increase of 575,000 in the number of subscriptions in2002. However, on average each subscription generated less revenue,as new customers and customers with prepaid subscriptions reducedthe average number of call minutes and revenues per subscription.

The market share of GSM subscriptions at 31 December 2002 was esti-mated to be 38% compared to 40% at 31 December 2001. The reduc-tion was due to increased competition. During the same period, theestimated mobile penetration in Hungary increased from 49% to 68%.

Operating expenses – Pannon GSM

Operating expenses increased by NOK 0.6 billion in 2002 compared to2001 primarily due to increased costs of materials and traffic chargesand increased depreciation caused by higher investments. Other oper-ating expenses also increased in 2002 compared to 2001 due to provi-sions of NOK 56 million to cover the estimated effect of charges relat-ed to the introduction of Universal Service Obligations with effect from1 February, 2002.

Capital expenditure – Pannon GSM

Capital expenditures decreased by NOK 0.3 billion in 2002 comparedto 2001 due to reduced GSM and IT investments.

DiGi.Com – Malaysia

(ownership interest 61.0% as of 31 December 2002)

(NOK in millions) 2002 20011)

2000

Mobile related revenues 2,273 691 -

Other revenues 442 215 -

Total revenues 2,715 906 -


EBITDA 1,022 306 -

Depreciation, amortization and write-downs 591 125 -

Operating profit 431 181 -

EBITDA/total revenues 38% 34% -

Operating profit/total revenues 16% 20% -

Capex 1,457 459 -


(period end) 1,443 1,477 -

No. of subscriptions (100% in thousand) 1,616 1,039 -


of acquisition.

Telenor consolidated DiGi.Com as a subsidiary effective 1 September2001, when Telenor increased the ownership interest in the companyfrom 32.9% to 61.0%. The following discussion and analysis ofDiGi.Com’s results of operations is based on DiGi.Com’s financial state-ments for the years ended 31 December 2001 and 2002, as preparedby DiGi.Com, adjusted to conform materially with Norwegian GAAP.


Telenor believe that such information provides a more useful measureof comparative financial performance for a period when DiGi.Com wasnot yet consolidated for a full year. However, such information doesnot purport to represent what the actual results of operations wouldhave been had DiGi.Com been consolidated from January 2001 and isnot necessarily indicative of future operating results.

Operating profit and EBITDA – DiGi.Com

Operating profit decreased in 2002 compared to 2001 if measured inNOK due to the strengthening of the Norwegian Kroner. Measured inlocal currency, operating profit increased. Operating profit includesdepreciation, amortization and write-downs of tangible and intangibleassets, which increased due to a shorter depreciation period for net-work-based equipment with effect from 1 July 2002. Operating profitbefore depreciation, amortization and write-downs (EBITDA) increasedin 2002 compared to 2001 by NOK 0.15 billion due to higher traffic as aresult of more subscriptions and increased use of short text messages(SMS), which more than offset increased operating expenses. TheEBITDA margin increased from 34% to 38% in 2002, while the operat-ing profit margin decreased.

Revenues – DiGi.Com

In 2002, the company had an 18% increase in revenues measured inlocal currency compared to 2001. Converted to NOK, the increase wasonly 5% due to the strengthening of the Norwegian Kroner. Growth inrevenue was due primarily to the increased traffic resulting from anincrease of 577,000 in the number of subscriptions and increased useof text messages (SMS) in 2002. However, on average each subscrip-tion generated less revenue, as new customers and customers withprepaid subscriptions reduced the average number of call minutes andrevenues per subscription.

The market share of GSM subscriptions at 31 December 2002 was esti-mated to be 19% compared to 17% at 31 December 2001. During thesame period, the estimated mobile penetration in Malaysia increasedfrom 31% to 37%.

Operating expenses – DiGi.Com

Operating expenses increased by NOK 0.1 billion in 2002 compared to2001, mainly due to increased depreciation. Effective 1 July 2002,DiGi.Com reduced the depreciation period for network-based equip-ment, which increased depreciation by NOK 0.2 billion in 2002.

Capital expenditure – DiGi.Com

Capital expenditures decreased by NOK 0.2 billion in 2002 comparedto 2001 mainly due to currency fluctuations.

Kyivstar – Ukraine


(NOK in millions) 20021)

2001 2000

Mobile related revenues 681 - -

Other revenues 27 - -

Total revenues 708 - -


EBITDA 403 - -

Depreciation, amortization and write-downs 98 - -

Operating profit 305 - -

EBITDA/total revenues 57% - -

Operating profit/total revenues 43% - -

Capex 329 - -


(period end) 994 - -

No. of subscriptions (100% in thousand) 1,856 - -


of acquisition.

Telenor increased the ownership interest in the company from 45.4% to54.2% and Telenor consolidated Kyivstar as a subsidiary effective 1September 2002, The following discussion and analysis of Kyivstar’sresults of operations is based on Kyivstar’s financial statements for theyears ended 31 December 2001 and 2002, as prepared by Kyivstar,adjusted to conform materially with Norwegian GAAP. Telenor believethat such information provides a more useful measure of comparativefinancial performance for a period when Kyivstar was not yet consoli-dated. However, such information does not purport to represent whatthe actual results of operations would have been had Kyivstar beenconsolidated from January 2001 and is not necessarily indicative forfuture operating results.

Operating profit and EBITDA – Kyivstar

Operating profit in 2002 increased compared to 2001, includingdepreciation, amortization and write-downs of tangible and intangibleassets, which increased due to increased capital expenditure. Operat-ing profit before depreciation, amortization and write-downs (EBITDA)increased in 2002 compared to 2001, by NOK 0.8 billion due to highertraffic as a result of more subscriptions, which more than offsetincreased operating expenses. The operating profit margin increased in2002 compared to 2001, and the EBITDA margin increased from 29% in2001 to 58% in 2002.

Revenues – Kyivstar

In 2002, the company had an 84% increase in revenues measured inlocal currency compared to 2001. Converted to NOK, the increase was57% due to the strengthening of the Norwegian Kroner. Growth inrevenues was primarily due to increased traffic resulting from anincrease of 761,000 in the number of subscriptions in 2002. However,on average each subscription generated less revenue, as new cus-tomers and customers with prepaid subscriptions reduced the averagenumber of call minutes and revenues per subscription.

The market share of GSM subscriptions at 31 December 2002 wasestimated to be 50% compared to 48% at 31 December 2001. Duringthe same period, the estimated mobile penetration in Ukraineincreased from 4.6% to 7.8%.


Operating expenses – Kyivstar

Operating expenses increased by NOK 0.1 billion in 2002 compared to2001, mainly due to an increase in costs of materials and trafficcharges as a result of higher traffic volume. Increased operatingexpenses measured in NOK were partly offset by the strengthening ofthe Norwegian Kroner. In general, operating expenses were low in2002 due to low marketing expenses and the company’s focus on costefficiency.

Capital expenditure – Kyivstar

In 2002, measured in local currency capital expenditures increasedmainly due to increased capacity and coverage investments in the GSMnetwork.

GrameenPhone – Bangladesh


Mobile related revenues 1,203 759 348

Other revenues 386 426 189

Total revenues 1,589 1,185 537


EBITDA 757 457 124

Depreciation, amortization and write-downs 126 129 83

Operating profit 631 328 41



Capex 342 425 266


(period end) 692 589 531

No. of subscriptions (100% in thousand) 769 464 191

Operating profit and EBITDA – GrameenPhone

Operating profit in 2002 was NOK 631 million, an increase of 92.4%compared to 2001. This includes depreciation, amortization and write-downs of tangible and intangible assets, which were at the same levelmeasured in NOK but increased in local currency due to a higher levelof capital expenditures in recent years. Operating profit beforedepreciation, amortization and write-downs (EBITDA) increased in2002 compared to 2001 by 66% due to higher traffic as a result ofmore subscriptions, which more than offset increased operatingexpenses.

Revenues – GrameenPhone

In 2002, revenues increased by 55% measured in local currency com-pared to 2001. Converted to NOK, the increase was 34% due to thestrengthening of the Norwegian Kroner. The increase in revenue wasprimarily due to increased traffic resulting from an increase of 305,000in the number of subscriptions in 2002. Fees that GrameenPhone col-lects on behalf of the authorities have been deducted from revenueseffective 1 July 2002 and totalled NOK 52 million for the second half of2002. This explains the reduction in other revenues, which was partlyoffset by increased sales of customer equipment.

The market share of GSM subscriptions at 31 December 2002 wasestimated to be 69% compared to 70% at 31 December 2001. Duringthe same period, the estimated mobile penetration in Bangladeshincreased from 0.5% to 0.9%.

ARPU was NOK 172 in 2002, down from NOK 190 in 2001. This decreasewas due to new customers and customers with prepaid subscriptionsreducing the average number of call minutes and revenues per sub-scription, as well as the strengthening of the Norwegian Kroner.

Operating expenses – GrameenPhone

Operating expenses increased in 2002 compared to 2001, mainly dueto increased operation and maintenance expenses, commissions andincreased license fees. The increase in operating expenses in local cur-rency was partly offset by the strengthening of the Norwegian Kroner.

Capital expenditure – GrameenPhone

Capital expenditures measured in NOK decreased in 2002 compared to2001 mainly due to currency fluctuations between NOK and Taka. Inlocal currency, capital expenditures in 2001 and 2002 were approxi-mately at the same level.

Other units in Mobile

(including amortization of net excess values and eliminations of pur-

chases and sales between the units in Mobile)


Reconciliation of EBITDA to operating (loss)

EBITDA (616) (427) (591)

Depreciation, amortization and write-downs2) 3,216 213 72

Operating (loss) (3,832) (640) (663)

2) Includes amortization and write-downs

of net excess values by1) 3,073 115 47

Capex 28 158 227

1) Net excess values are the difference between Telenor’s acquisition cost

and Telenor’s share of equity at acquisition of subsidiaries.

Other units comprise djuice.com, Telenor’s mobile operations in Swe-den (djuice.se), and costs related to the management and administra-tion of Telenor’s international mobile portfolio.

The increase in operating loss in 2002 compared to 2001 was due toincreased amortization of excess values, including goodwill, in connec-tion with the acquisition and consolidation of DiGi.Com, Pannon GSMand Kyivstar as well as write-down of goodwill related to DiGi.Com.Anassessment of book values was carried out in accordance with gener-ally accepted accounting principles, which led to a write-down ofgoodwill in DiGi.Com of NOK 2.1 billion. The write-down was based onthe publicly quoted share price at 31 December 2002, adjusted toreflect a control premium. Operating loss before depreciation, amorti-zation and write-downs of tangible and intangible assets ( EBITDA)increased in 2002 compared to 2001 due to gain of NOK 259 millionrelated to sale of the subsidiary Norcom Network Communications Inc.in 2001. Excluding the effect of this gain in 2001 the EBITDA loss waslower in 2002 due to reduced expenses caused by a lower activity levelin djuice.com and reduced management and administration expenses.

The decrease in capital expenditures in 2002 compared to 2001 wasdue to reduced investments in djuice.com.


Associated companies and joint ventures in Mobile


Telenor's share of:1)

Net income (loss) 612 421 (686)

Amortization of Telenor’s net excess values 798 1,276 693

Write-downs of Telenor’s net excess values 1,884 10,900 -

Gain on disposal of ownership interests 40 21,432 918

Net result from associated companies (2,030) 9,677 (461)

1) The figures are partly based on the management's estimates in connection

with the preparation of the consolidated financial statements. The consoli-

dated profit and loss statement contains only the line item "net result from

associated companies". Telenor’s share of the other items shown in the

table is not included in the consolidated financial statements but this


Net excess values are the difference between Telenor’s acquisition cost

and Telenor’s share of equity at acquisition of the associated companies.

These results were affected by:• The acquisition of Sonofon and DTAC/UCOM in the autumn of 2000• The sale of VIAG Interkom and Esat Digifone in 2001 and of Extel in

2002• DiGi.Com, Pannon GSM and Kyivstar being accounted for as

subsidiaries effective 1 September 2001, 4 February 2002 and 1 Sep-tember 2002, respectively.

Telenor’s mobile associated companies outside Norway experienced asignificant increase in their customer base in 2002. The growth wasparticularly significant in DTAC in Thailand and VimpelCom in Russia.

Net income in 2002 included a write-down of Telenor’s investment inOniWay of NOK 316 million. This investment was written down as it wasnot considered commercially sensible to continue operations asplanned.

As a result of the decrease in market values, in the second quarter of2001 Telenor wrote down the investment in Sonofon by NOK 7.5 billionto reflect the estimated fair value, and at 31 December 2002 Telenorwrote down an additional NOK 1.0 billion to the estimated fair valuebased on discounted cash flows and comparison to other companies.Telenor wrote down DTAC/UCOM by NOK 3.4 billion to the publiclyquoted share price at 31 December 2001 and by an additional NOK 0.9billion to the publicly quoted share price at 31 December 2002. Telenorbelieve that the write-downs in 2002 and the consolidation of PannonGSM and Kyivstar could contribute to decrease in the amortization ofexcess values included in associated companies in 2003 compared to2002.

Gains on disposals in 2002 related to the sale of Extel in December2002. Gains in 2001 related to the sale of VIAG Interkom and EsatDigifone in January and April 2001, respectively.

TELENOR NETWORKS


External revenues 13,760 14,106 13,998



operations 1 6 320

Total revenues 16,488 16,568 16,685



Associated companies - - -

Net financial items (329) (149) (72)

Profit before taxes and minority interests 2,197 2,026 2,975


EBITDA 5,717 5,666 5,672





Investments:

– Capex 1,853 3,694 3,597

– Investments in businesses - 25 6


(period end) 3,820 3,964 4,094

– Of which outside Norway 42 38 12

Operating profit

Increased operating profit in 2002 compared to 2001 was due toreduced operating expenses, including write-downs, which more thanoffset reduced revenues.


Revenues


Business market – fixed network

Analog (PSTN)/digital (ISDN) subscriptions

and connections 1,335 1,313 1,362

Fixed to fixed traffic domestic, excluding

traffic to Internet service providers (ISP) 776 838 886

Traffic to Internet service providers 170 230 240

Traffic to mobile 666 694 667

Traffic abroad 180 196 218

Other traffic 320 320 316

Total business market – fixed network 3,447 3,591 3,689

Residential market – fixed network

Analog (PSTN)/digital (ISDN) subscriptions

and connections 3,026 2,916 2,991

Fixed to fixed traffic domestic, excluding

traffic to Internet service providers 1,190 1,288 1,384

Traffic to Internet service providers 334 485 522

Traffic to mobile 1,144 1,111 1,106

Traffic abroad 279 287 288

Other traffic 660 725 774

Total residential market – fixed network 6,633 6,812 7,065

Wholesale market – fixed network

Domestic interconnect 736 722 497

International interconnect 340 418 558

Transit traffic 1,027 953 736

Total wholesale market – fixed network 2,103 2,093 1,791

Total fixed network 12,183 12,496 12,545

Leased lines 988 1,040 884

Other 589 570 569



Gains on disposal of fixed assets and operations 1 6 320

Total revenues 16,488 16,568 16,685

Due to migration of fixed traffic to mobile traffic, and transition ofInternet traffic (ISP) which is measured in minutes to ADSL which not ismeasured, total fixed traffic measured in minutes decreased by 8.5% inthe Norwegian market in 2002.

Telenor’s market share measured in traffic minutes, including Internettraffic (dial up access) recorded in the Plus and Business Solutionsbusiness areas, was 72% at 31 December 2002, with Networks having amarket share of 63% and the Plus and Business Solutions businessareas having the remaining 9%. The decline in Networks’ market sharefrom 68% at the end of 2001 was offset by an increase in Plus’ andBusiness Solutions’ market share, which resulted in Telenor’s total mar-ket share being substantially in line with that of 2001.

External revenues

Business market. Traffic minutes decreased by 13% in 2002 com-pared to 2001 due to migration to mobile traffic, transition to ADSL andpre-selection traffic; however, Telenor’s market share measured inminutes was in line with that of 2001. This resulted in declining trafficrevenues in 2002. Increased subscription prices from 1 May 2002 off-set the impact of reduction in PSTN and ISDN subscribers and fewerconversions from PSTN to ISDN compared to 2001.

Residential market. External revenues in the residential marketdecreased in 2002 compared to 2001 as a result of a 14% decrease intraffic minutes due to migration to mobile traffic, transition to ADSLand pre-selection traffic. The decrease in external revenues for pre-

selection traffic was partly offset by increased internal revenues fromPlus. The market share for traffic decreased from 66% at 31 December2001 to 60% at 31 December 2002. In particular, fixed-to-fixed trafficin Norway and Internet traffic decreased, while fixed-to-mobile trafficand traffic abroad increased. This change in the traffic mix to trafficwith higher prices partly offset the reduction in volume.

Increased subscription tariffs from 1 May 2002 partly offset the nega-tive impact of the reduction in the number of PSTN and ISDN sub-scribers and fewer conversions from PSTN to ISDN.

Wholesale market. External revenues from domestic interconnectioninclude revenues from other Norwegian fixed telephony operators andmobile operators for interconnection with the fixed network, as well assale of ADSL. External revenues from domestic interconnectionincreased in 2002 mainly as a result of increased revenues from ADSL.

External revenues from international interconnection consist ofrevenues Telenor charge international operators for connection to thenetwork. Reduced external revenues from international interconnectionin 2002 compared to 2001 were primarily due to increased competitionin the market resulting in lower market share.

Transit traffic is traffic from other domestic and international operatorsthat is sent via Telenor’s fixed network to third party operators. Theincrease in external revenue from transit traffic in 2002 compared to2001 was due to the increased domestic transit traffic, mainly frommobile operators. This was partly offset by the decrease in revenue frominternational transit traffic due to price reductions. The transit traffic islow margin traffic.

Leased lines and other. The decrease in revenues from leased linesin 2002 compared to 2001 was due to the introduction of new productswith lower prices, primarily to end-users, from 1 July 2002 and theimpact of declined demand for network capacity. In the end-user mar-ket, many customers switched from leased lines to lower priced ADSL.

Other revenues are revenues from other network-based and non-net-work-based activities and from maritime services.

Internal revenues The increase in internal revenues in both 2001and 2002 was due to increased internal wholesale revenues fromincreased sales of ADSL and domestic interconnection related to pre-selection traffic to the business areas Plus and Business Solutions. Inter-nal sales of leased lines and co-locations also contributed to theincrease in internal revenues.

Operating expenses



Internal costs of materials and traffic charges 2,180 2,246 2,575



Salaries and personnel costs 1,957 1,920 1,868


Other internal operating expenses 1,831 1,904 3,168

Depreciation and amortization 3,173 2,921 2,611


Losses on disposal of fixed assets and

operations 11 - 2



Total costs of materials and traffic charges decreased in 2002 mainlydue to the decrease in traffic to ISP as a result of the transition to ADSLand internal pre-selection traffic, as well as price decreases on inter-national traffic. In addition, the full-year effect of the decrease inmobile termination prices from 1 May 2001 reduced the internal costsof materials and traffic charges in 2002 compared to 2001.

Own work capitalized decreased in 2002 as a result of reduced invest-ment activity.

Salaries and personnel costs increased in 2002 compared to 2001 main-ly due to increased pension costs. General increases in salaries, as well astransfer of approximately 120 employees from other business areas as of1 October 2002, were offset by a reduction in the number of man-yearsduring 2002. During 2002, Telenor decided to reduce the workforce bymore than 300 man-years, and part of this reduction occurred in 2002.

The reduction in workforce and lower total external and internal otheroperating costs, primarily consultancy fees, travel and IT-costs, weredue to improved operational efficiency in 2002. Furthermore, reduc-tion in the failure rate of the network, due to investments in previousyears contributed to reduce maintenance costs. Expenses for work-force reductions were NOK 161 million in 2002.

Significant investments in recent years prior to 2002 and reduceddepreciation periods for categories of cables and switches from 1 April2001, led to an increase in depreciation and amortization both in 2001and 2002. Increased completion of assets under construction in 2002also contributed to higher depreciation in 2002.

Capital expenditure

In 2002, capital expenditure decreased by approximately 50% com-pared to 2001. This was due to a fall in the demand for fixed networkservices and an increased use of earlier capital expenditures related toISDN, ADSL and capacity. In 2001, NOK 360 million was invested in thetransatlantic fibre cable, TAT 14 and significant investments were alsomade in the fixed network.

TELENOR PLUS



Internal revenues 484 432 375




Operating profit (loss) (883) (841) 135

Associated companies (270) (547) 20


Profit before taxes and minority interests (1,968) (1,798) 147

Reconciliation of EBITDA to operating

profit (loss)

EBITDA 139 248 611


Operating profit (loss) (883) (841) 135

Investments:

– Capex 435 835 573

– Investments in businesses 2,490 906 1,540


(period end) 1,332 1,344 1,148

– Of which abroad 243 198 98



Broadcast (161) (527) 227

Content & Interactive (275) (140) (57)

Internett (371) (92) 54

Other (76) (82) (89)

Total operating profit (loss)2)

(883) (841) 135

2) Includes amortization and write-downs of

Telenor’s net excess values by1) 156 71 45


and Telenor’s share of equity at acquisition of subsidiaries.


Operating loss increased in 2002 compared to 2001 mainly due toincreased sales of and marketing activities for the ADSL product andconsolidation of new subsidiaries. In addition, expenses for workforcereductions and expenses related to termination of contracts amountedto NOK 92 million, an increase of NOK 43 million compared to 2001. In2002, write-downs of NOK 135 million were recorded compared to NOK494 million in 2001. In Broadcast, there was a decrease in operatingloss of NOK 366 million mainly due to reduced write-downs in 2002compared to 2001. The consolidation of Canal Digital from 30 June2002, had a negative impact on operating profit of approximately NOK185 million, including amortization of goodwill and other excess values.The increase in operating loss in Content & Interactive was due to thedevelopment of interactive TV and broadband services, resulting inincreased operating expenses, including amortization, depreciationand write-downs. In Internett, expenses related to increased acquisi-tion of ADSL customers in the residential market in Norway and Swe-den resulted in increased operating loss in 2002 compared to 2001.The operating loss in Telenordia Privat AB (Sweden) was NOK 65 mil-lion. "Other" consists of projects and support functions.

Revenues


External revenues

Broadcast 3,221 2,231 2,072

Content & Interactive 160 188 72

Internett 976 508 306

Other 10 15 37





External revenues in Broadcast increased by NOK 990 million in 2002.External revenues at Canal Digital were NOK 1,139 million and externalrevenues from the full year consolidation of Sweden On Line amountedto NOK 126 million. External revenues in Satellite Broadcastingdecreased by NOK 346 million due to the phasing out of analogue broad-casting and because revenues from sales to Canal Digital, whichpreviously were reported as external revenues, were eliminated followingthe consolidation of Canal Digital. Such revenues were NOK 206 millionfor the period from 30 June 2002, resulting in a net effect of the consoli-dation of Canal Digital on external revenues in Broadcast of NOK 933million. Avidi (Cable-TV) reported external revenues of NOK 657 million,an increase of NOK 77 million compared to 2001 due to increased pricesand subscribers adopting new services. External revenues at TelenorVision, Sweden, increased by NOK 106 million to NOK 330 million in 2002due to the full year’s consolidation of Sweden On Line.


At 31 December 2002, the number of subscribers in Broadcast was2,405,000, a net increase of 3.5% compared to 31 December 2001, andCanal Digital had 738,000 subscribers, a net increase of 12.3% comparedto 31 December 2001. Avidi increased the number of subscribers by11,000 to 371,000 in 2002. Telenor Vision had 1,296,000 subscribers at31 December 2002, an increase of 1% compared to 31 December 2001.

The decrease in external revenues in Content & Interactive was mainlydue to lower sales of CA modules and smart cards in Conax in 2002compared to 2001. In 2001 there was greater demand for these prod-ucts due to increased growth in the number of digital TV subscribers.

Internett in Norway increased external revenues by NOK 293 million in2002 compared to 2001, of which the increase in sales of ADSL wasNOK 212 million. Furthermore, external revenues from pre-selectiontraffic (Internet) increased by NOK 81 million. Prior to 2002, these rev-enues were recorded as external revenues from Networks. TelenordiaPrivat AB was consolidated from 1 October 2001, and contributed NOK175 million to the increase in external revenues.

The number of Telenor Internett subscribers in the Norwegian marketincreased by 15.5% to 960,000 at 31 December 2002, of which 533,000were FriSurf subscribers and 90,000 were ADSL subscribers. Internett inNorway increased the number of ADSL subscribers by 67,000 to90,000 during 2002. The customer base in Telenordia Privat AB(Sweden) was sold to the listed company Glocalnet AB at the end ofDecember 2002 in exchange for 37.2% of the shares in Glocalnet AB.

Internal revenues primarily consisted of traffic revenues from Internettand Telenordia Privat AB, as well as satellite revenues in Broadcast,mainly sales to Satellite Services and Satellite Networks. The increase in2002 compared to 2001 related to increased interconnection traffic inSweden and sale of satellite capacity.

Operating expenses


External costs of materials and traffic charges 1,577 1,098 889

Internal costs of materials and traffic charges 900 344 237



Salaries and personnel costs 787 655 465

Other external operating expenses 981 780 433


Depreciation and amortization 887 595 464



operations 6 18 16


Total costs of materials and traffic charges increased in 2002 mainlydue to increased sales of ADSL, consolidation of Canal Digital and thefull year effect of consolidation of Telenordia Privat AB and SwedenOnline. The gross margin (revenues less costs of materials and trafficcharges as a percentage of revenues) decreased by 8.6 percentagepoints to 48.9%. The decrease was mainly due to ADSL growth and theconsolidation of Canal Digital.

Salaries and personnel costs in 2002 increased due in part to the con-solidation of Canal Digital and in part to new employees due to thehigher activity. At the end of 2002 and the beginning of 2003 therewas a reduction in the number of employees as a restructuring meas-ure, but the reduction in expenses will be obtained in 2003.

The increase in other operating expenses from 2001 to 2002 was dueto the consolidation of Canal Digital, which amounted to NOK 313 mil-lion, and the full year effect of the consolidation of Telenordia PrivatAB, which amounted to NOK 120 million. In 2002, NOK 92 million wasrecorded in expenses related to workforce reductions and terminationof contracts compared to NOK 49 million in 2001. In Internett, otheroperating expenses increased from 2001 to 2002, partly as a result ofincreased advertising, marketing and sales commissions related toADSL. In other areas, other operating expenses were reduced as aresult of cost saving initiatives, mainly relating to consultancy andtravel costs in Broadcast. Bad debt was reduced due to reversal ofprevious loss provisions.

Compared to 2001, amortization and depreciation increased in 2002,mainly as a result of the acquisition of Canal Digital and TelenordiaPrivat AB. The increase was also partly due to depreciation and amorti-zation of investments relating to content and interactive services andthe digital cable-TV network, partly offset by reduced depreciation asa consequence of the write-downs recorded at the end of 2001.

In 2002, write-downs of NOK 135 million were made, mainly on set-topboxes for the SMATV market, on platforms related to new broadcastingstandards and on security technology (digital certificates) related tointeractive TV payment system.

Capital expenditure

Capital expenditures decreased in 2002 compared to 2001, mainly dueto the extensive upgrade of the cable-TV network performed in 2001.In addition, there was lower capital expenditure in the terrestrial trans-mission network in 2002.



Telenor's share of:1)

Net (loss) (145) (464) (191)

Amortization and write-downs of Telenor’s

net excess values 125 80 18

Gain (loss) on disposal of ownership interests - (3) 229

Net result from associated companies (270) (547) 20

1) The figures are partly based on the management's estimates in connection

with the preparation of the consolidated financial statements. The

consolidated profit and loss statement contains only the line item "net

result from associated companies". Telenor's share of the other line items

in the table is not included in the consolidated financial statements but this


Net excess values are the difference between Telenor’s acquisition cost

and Telenor’s share of equity at acquisition of the associated companies.

Canal Digital was consolidated as a subsidiary as of 30 June 2002 andthe figures are therefore not comparable with 2001. As Canal Digitalwas accounted for as an assosiated company for only 6 months in2002, net loss in 2002 decreased compared to 2001. At the end of2001 Otrum disposed of businesses that generated losses, which con-tributed to a reduction in net loss for Otrum in 2002 compared to 2001.The fair value of Otrum was estimated to be lower than the book valueand excess values related to Otrum was written down during 2002.


TELENOR BUSINESS SOLUTIONS



Internal revenues 1,713 1,324 958




Operating (loss) (1,807) (2,968) (1,173)

Associated companies 1 (874) (69)


Profit before taxes and minority interests (1,860) (4,158) (1,403)

Reconciliation of EBITDA to operating loss

EBITDA 26 (828) (600)


Operating (loss) (1,807) (2,968) (1,173)

Investments:

– Capex 929 1,041 1,806

– Investments in businesses 175 531 2,858


(period end) 3,886 4,225 3,992

– Of which outside Norway 2,606 2,824 2,632

Operating (loss)


Business Solutions Norway (1,251) (609) (248)

Business Solutions International (556) (2,359) (925)

Total operating (loss)1)

(1,807) (2,968) (1,173)

1) Include amortization and write-downs of

Telenor’s net excess values by2) 335 1,129 174


and Telenor’s share of equity at acquisition of subsidiaries

Business Solutions Norway



EBITDA (13) 54 44

Depreciation, amortization and write-downs3) 1,238 663 292

Operating (loss) (1,251) (609) (248)


Telenor’s net excess values by 107 180 12

Business Solutions International



EBITDA 38 (882) (644)

Depreciation, amortization and write-downs4) 594 1,477 281

Operating (loss) (556) (2,359) (925)


Telenor’s net excess values by 228 949 162

The decrease in operating loss in 2002 compared to 2001 was due tothe negative results from Nextra Germany and the CSP activity in Nex-tra Switzerland no longer being consolidated and to the restructuringof the remaining operations of Nextra International at the end of 2001,combined with increased gross margin (revenues less traffic chargesand cost of materials as a percentage of revenues) from access, net-

work and communication services in Norway in 2002. The operatingloss for Business Solutions Norway increased in 2002 compared to2001 due to significantly lower revenues from ASP, operating services,software and consulting services and due to expenses for restructuringof the business in 2002, including write-downs.

Nextra International’s activities were further downscaled in the secondhalf of 2002 and beginning of 2003 by selling the remaining opera-tions in Switzerland (Aspectra), Nextra Hungary Kft, Nextra TelecomGmbh (Austria) and Nextra Italy. At the end of 2002, Telenor BusinessSolutions became the majority shareholder of the Swedish listed com-pany Utfors AB.

Revenues


External revenues

ASP, operating services, software and

consulting services 803 1,077 917

Access, network and communication services 1,374 1,378 1,402

Total Business Solutions Norway 2,177 2,455 2,319

Nextra international 851 1,271 818

Business Solutions Sweden 739 310 4

Comincom/Combellga 677 580 217

Total Business Solutions International 2,267 2,161 1,039


Internal revenues 1,713 1,324 958


operations - - -


Total revenues (internal and external) increased by 4% in 2002 com-pared to 2001. External revenues from sales of ASP, operating services,software and consulting services decreased by 25% in 2002. This wasdue to the weak market for sales of operating services and software foruse in large PC environments (Computer Associates software) in 2002.External revenues from Access, network and communication services inNorway remained in line with 2001.

The decrease in revenues from Business Solutions International wasmainly due to the disposal of operations in Nextra international in thefourth quarter 2001 and during 2002. The increase in revenues fromBusiness Solutions Sweden was mainly due to the full-year effect ofthe consolidation of Telenordia. Revenues measured in U.S. dollars inComincom/Combellga increased in 2002 compared to 2001 byapproximately 32%, due to substantial growth in the Russian marketcombined with significant organic growth. The strengthening of theNorwegian Kroner (NOK) against the U.S. dollar limited this growth to17% when measured in NOK.

The 29% increase in internal revenues in 2002 compared to 2001 wasmainly due to the full-year effect of the consolidation of Telenordia. InNorway, there was a significant increase in internal sales of dataservices to Telenor Plus relating to sale of ADSL in the residentialmarket, partly offset by lower sales of operating services due to highinternal sales in the fourth quarter 2001 to EDB Business Partner inrelation to the contract with Den Norske Bank.


Operating expenses



Internal costs of materials and traffic charges 1,393 1,190 1,057






Depreciation and amortization 1,099 1,030 568

Write-downs 734 1,110 5


operations 46 6 5


The decrease in operating expenses in 2002 compared to 2001 wasdue to the disposal of operations in Nextra International in the fourthquarter of 2001 and during 2002, the effect of cost reductionprograms implemented across the business during 2002, as well as thereduction in operating expenses and write-downs related to restruc-turing activities. The reclassification of some lease agreements fromoperating to finance lease agreements in the third quarter of 2002contributed to a reclassification of NOK 76 million from otheroperating expenses and cost of materials to depreciation in 2002.

Costs of materials and traffic charges increased by 1% in 2002 com-pared to 2001, whereas total revenues increased by 4%. This increasein gross margin was mainly due to disposal of operations in NextraInternational with low gross margin in 2001.

Salaries and personnel costs decreased in 2002 compared to 2001 dueto disposal of operations in Nextra International. This was partly offsetby a general increase in wages and the consolidation of Telenordia. In2002, there was a reduction in the workforce in the operating servicedivision. This as a result of the weak market conditions and theintegration with Telenor’s internal IT operating environment.

Other operating expenses decreased by NOK 575 million in 2002 com-pared to 2001. In 2002, NOK 88 million was expensed for employee ter-mination benefits and loss contracts, mainly related to the ASP, operat-ing and software services in Norway. In 2002, NOK 229 million wasexpensed for restructuring and loss contracts. Of the decrease in otheroperating expenses, NOK 482 million related to Nextra International,due to disposal of operations and reduced restructuring expenses byNOK 167 million compared to 2001, as well as reduced activity in theremaining Nextra International operations. Other operating expenses inSweden increased by NOK 47 million from 2001 to 2002 due to Telenor-dia being consolidated for the full year 2002. Other operating expensesin Telenor Business Solutions Norway decreased by NOK 90 million from2001 to 2002, of which the purchase of external consultancy servicesdecreased by NOK 95 million from 2001 to 2002. NOK 79 million wasrecorded for employee termination benefits and loss contracts in Busi-ness Solutions Norway, compared to NOK 53 million in 2001.

Depreciation and amortization in our Norwegian operations increasedin 2002 compared to 2001, mainly in connection with investments inthe development of the IP network and the reclassification in the thirdquarter of some lease agreements related to operational and customerequipment from operational to finance lease agreements. Depreciationand amortization in Telenor Business Solutions Internationaldecreased in 2002 compared to 2001 due to the net effect of thewrite-downs performed in 2001 in Nextra International and disposal of

operations in Nextra International in 2001, partly offset by the effect ofconsolidation of Telenordia.

In connection with the process of integrating the operating servicesbusiness of Business Solutions with internal IT operating environment,wich was started in the third quarter of 2002, it was decided to reducethe number of operating platforms and focus the activity. The salespotential for CA-software and the value of the service contracts, plat-forms and equipment were also evaluated. Based on these valuations,tangible assets and intangible assets were written down by NOK 646million in 2002. Further reduced expectations of future growth in earn-ings, combined with an assessment of the profitability of the individualcompanies during 2002, led to further write-downs of goodwill in Nex-tra International of NOK 73 million. In addition, write-downs of NOK 15million were made in Business Solutions Sweden in 2002, mainly relat-ed to IT development projects that were terminated.

Losses on disposal of fixed assets and operations in 2002 relatedmainly to loss on sale of the remaining operations in Switzerland(Aspectra) and Nextra Hungary Kft.

Capital expenditure

Capital expenditure in 2002 decreased by NOK 112 million compared to2001. Capital expenditure in Business Solutions Norway increased byNOK 73 million due to the cumulative effect of NOK 326 million, of thereclassification from operating to finance lease, which was partly off-set by lower investments in the fixed networks/IP networks. Decreasedcapital expenditure in Business Solutions International was an effect offewer companies and lower activity.


Until 1 October 2001, associated companies is Business Solutionsmainly consisted of Telenordia AB. Telenor consolidated Telenordia asa subsidiary as of 1 October 2001. Due to reduced expectations offuture growth in earnings, the value of goodwill related to Telenordiawas written down by NOK 665 million in the second quarter of 2001.

EDB BUSINESS PARTNER




Internal revenues 955 1,458 1,505




Operating profit (loss) (409) (1,208) 201

Associated companies (5) 130 (21)


Profit (loss) before taxes and minority

interests (500) (1,172) 161

Reconciliation of EBITDA to operating profit (loss)

EBITDA 348 447 554

Depreciation, amortization and write-downs 757 1,655 353

Operating profit (loss) (409) (1,208) 201

Investments:

– Capex 167 174 335

– Acquisition of businesses 88 749 2,935


(period end) 2,760 3,172 2,745

– Of which outside Norway 308 344 148


EDB Business Partner encompasses the former Telenor Programvareand EDB ASA, which were consolidated effective as of 1 May 1999.Acquisitions and their effective dates are: Telesciences, Inc. (7 Decem-ber, 1999); Fellesdata (1 April 2000); BDC (1 July 2000); PDS AS (1 April2001); DnB IT Drift (1 July, 2001); Unigrid AB and AcceptData AS (1 August 2001), and Infovention AB (1 September 2001).

Operating profit (loss) and EBITDA

Operating loss in 2002 decreased compared to 2001, mainly due to alower level of write-downs in 2002, while depreciation and amortiza-tion was in line with 2001. Operating profit before depreciation, amorti-zation and write-downs (EBITDA) decreased in 2002 compared to 2001due to reduced earnings in all areas except the Operations area andlower gains related to sale of properties in 2001. In the first half of2002, a restructuring process was initiated in the Banking & Finance,Telecom and Consultancy areas, and total expenses of NOK 111 millionwas recorded for restructuring in 2002 compared to NOK 179 million in2001. The Operations area showed improved profitability compared to2001 as a result of restructuring of the business in 2001 and new busi-nesses. Revenues from the Telecom area decreased significantly in thedomestic market. However, underlying margins improved towards theend of 2002 due to cost reductions. Revenues and margins from theBanking & Finance decreased in 2002 due to falling sales to financialinstitutions both in Norway and Sweden.

In 2002 depreciation and amortization was in line with 2001. Individualgoodwill items have been evaluated on the basis of discounted expect-ed future cash flows. This resulted in write-downs of goodwill totalingNOK 356 million, of which NOK 263 million related to the Banking &Finance area and NOK 93 million to the Consultancy area.

Revenues

Revenues in 2002 were 10% lower than in 2001. Revenues from theOperations area increased mainly due to the full year effect of the out-sourcing contract with Den Norske Bank and the acquisition of theSwedish subsidiary Unigrid in 2001. Revenues from the Banking &Finance, Telecom and Consulting areas decreased due to depressedmarket conditions. The decline in Telecom was particularly strong inthe domestic market.

Operating expenses


Costs of materials and traffic charges 393 283 252

Own work capitalized - - -


Other operating expenses 1,738 2,177 1,561

Depreciation and amortization 393 393 352


Losses on disposal of fixed assets and operations - - -


The 21% reduction in operating expenses in 2002 compared to 2001was primarily related to restructuring measures and lower amortizationand write-downs of goodwill compared to 2001.

Cost of materials increased as a consequence of new businesses in theOperations area.

The number of employees decreased during 2002 which, together withother cost saving measures, reduced salaries and personnel costs andother operating expenses.

Write-downs of goodwill totaled NOK 356 million in 2002, a decreaseof NOK 906 million compared to 2001, with NOK 263 million related tothe Banking & Finance area and NOK 93 million to the Consultancyarea. Write-downs were based on a review of all individual goodwillitems based on discounted future cash flows.

Capital expenditure

In 2002 capital expenditure related predominantly to investments incomputer hardware and software, mainly within the Operating area of EDBBusiness Partner and its mainframe platform. In 2002 parts of the Capitalexpenditures was due to replacement of equipment in new businesses.

OTHER BUSINESS UNITS

Revenues


External revenues

Satellite Services 2,100 1,210 777

Satellite Networks 544 354 327

Itworks (filed for bankruptcy in April 2002) 155 957 883

Inkasso AS (sold in 2000) - - 45

Finans AS (sold in 2000) - - 176

Other 521 473 330


Internal revenues. 658 1,038 1,491

Gains on disposal of fixed assets and operations - 1 4




Satellite Services 100 27 76

Satellite Networks 39 (118) (120)

Itworks (filed for bankruptcy in April 2002) (23) (265) (128)

Inkasso AS (sold in 2000) - - 17

Finans AS (sold in 2000) - - 35

Other (206) (330) (61)

Total operating (loss) (90) (686) (181)

Investments:

– Capex 267 476 599

– Acquisition of businesses 762 252 1,677

Satellite Services (former Satellite Mobile)


External revenues 2,100 1,210 777



Total revenues 2,153 1,271 853


EBITDA 303 152 147


Operating profit 100 27 76

Revenues – Satellite Services

The increase in external revenues in Satellite Services in 2002 was due tothe consolidation of former COMSAT Mobile Communications, renamedTelenor Satellite Services Inc. (TSSI), from 11 January 2002. The strength-ening of the Norwegian Kroner (NOK) adversely affected revenues meas-ured in NOK from the operations in all of the countries in which SatelliteServices operates. In addition, external revenues in the subsidiary Marlinkwere adversely affected by general price reductions on Inmarsat services.In the Norwegian operations, revenues increased due to increased sale of


Inmarsat traffic volume, and amendments to agreements relating to theformer Eik cooperation that increased revenues and expenses.

Operating profit and EBITDA – Satellite Services

Operating profit in 2002 increased significantly compared to 2001.Operating profit includes depreciation, amortization and write-downsof tangible and intangible assets which increased due to the consolida-tion of TSSI (NOK 71 million). Operating profit before depreciation,amortization and write-downs (EBITDA) increased in 2002 comparedto 2001 due to the consolidation of TSSI (NOK 110 million) andincreased sales volumes, partly offset by lower margins and thestrengthening of the Norwegian Krone.

Capital expenditure and acquisition of business

– Satellite Services

In 2002, Satellite Services capital expenditure related primarily toSealink equipment and to the upgrade of the Eik earth station (NOK126 million). The acquisition of COMSAT amounted to NOK 743 million.Capital expenditure in 2001 related primarily to Sealink equipment.

Satellite Networks


External revenues 544 354 327



Total revenues 611 443 385


EBITDA 109 36 (26)

Depreciation and amortization and write-downs 70 154 94

Operating profit (loss) 39 (118) (120)

Revenues – Satellite Networks

External revenues increased in 2002 compared to 2001 due to newcontracts with international organizations entered into in 2002, whichalso resulted in increased sales and supplementary services.

Operating profit (loss) and EBITDA – Satellite Networks

An operating profit was recorded in 2002 compared to an operatingloss in 2001. This was due to reduced write-downs and reduced losseson disposal of fixed assets and operations in 2002, as well as a largershare of revenues being generated from higher margin products.

Capital expenditure – Satellite Networks

Investments in 2002 (NOK 82 million) and 2001 (NOK 178 million) weremainly related to customer contracts, and in 2001 also related to theTotolotek project in Poland.

Itworks

Itworks filed for bankruptcy on 24 April, 2002. As a result of largelosses incurred in 2001 and at the beginning of 2002, and with furtherlosses expected due to failing market conditions, Telenor decided thatthere was no sound financial basis to continue to finance the company.

Other

Other includes principally Telenor Teleservice, Telenor Venture andTelenor Innovation. The unit TTYL was also included in 2000 and 2001,but at the end of 2001 Telenor decided to close it down. The reducedoperating loss in “other” in 2002 compared to 2001 was due to lossesand write-downs in 2001 in TTYL, partly offset by operating losses inTeleservice in 2002.

Teleservice reduced external revenues compared to 2001 due to lowerdemand for directory enquiry services, and call center functions. Dueto this development Teleservice closed down six units during 2002 andrecorded for workforce reductions of NOK 75 million, as well as NOK 66million related to the accounting of previously granted pension bene-fits in Teleservice.

External revenues in Innovation increased compared to 2001 due toincreased sales, mainly in the subsidiaries Oilcamp and Connect. This waspartly offset by negative development in the subsidiary Fiber. Innovationmade write-downs of NOK 30 millions related to goodwill in 2002.

Capital expenditure – Other

Capital expenditure in 2002 in “other” related mainly to computersystems in Teleservice whereas investments in messaging services inTTYL took place in 2001.

CORPORATE FUNCTIONS AND GROUP ACTIVITIES

Revenues


External revenues 315 375 195


Gains on disposal of fixed assets and operations 143 5,116 657



EBITDA (477) 4,593 445


Operating profit (loss) (1,185) 4,139 16

Investments:

– Capex 1,531 2,642 1,372

– Investments in businesses 57 127 271

This area comprises Real Estate, Research and Development, StrategicGroup Projects, the internal IT department, Group Treasury, Interna-tional Services and central staff and support functions.

Revenues

External revenues decreased in 2002 due to lower sales to formerTelenor companies within IT operations and termination of leases onproperties. Gains in 2001 were mainly related to the sale of TelenorMedia. Remaining gains in 2001 and 2002 were mainly related to salesof properties.

Operating profit (loss) and EBITDA

In 2002, an operating loss was recorded compared to an operatingprofit in 2001. This development was connected to the gain from thesale of Telenor Media in 2001 and increased depreciation, amortizationand write-downs in 2002. The high operating profit before depreciation,amortization and write-downs (EBITDA) in 2001 compared to anEBITDA-loss in 2002 was connected to the gain from the sale of TelenorMedia in 2001. NOK 327 million was expensed in 2002 due to workforcereductions and loss contracts, compared to NOK 74 million in 2001related to the establishment of the Telemuseum foundation. In addition,NOK 48 million was expensed in 2002 in connection with IT-solutionswhich no longer are in use. Of the NOK 327 million expensed in 2002,NOK 137 million was related to workforce reductions and NOK 190 mil-lion was estimated losses on property lease contracts.

Expenses for lease of properties and consultancy fees were reduced in2002 compared to 2001. The decrease in leased properties was due to


investments in own properties which have replaced rented premises andto the accrual for loss on property leases as of 30 June 2002. Consul-tancy fees were reduced due to lower activity in project and acquisitionactivities. NOK 82 million was recorded as losses on disposal in 2002,mainly relating to the bankruptcy of the former subsidiary Itworks AS.

Depreciation and amortization increased in 2002 due to the invest-ments in property and new IT solution. In 2002, NOK 42 million waswritten-down on data equipment and IT solutions which no longer arein use, compared to write-downs of NOK 23 million in 2001.

Capital expenditure

Capital expenditure in 2002 and 2001 was mainly related to the newhead office at Fornebu outside of Oslo and the new IT solutions for theGroup. The investments were reduced in 2002 compared to 2001 asthese projects were completed during 2002.

TELENOR MEDIA

Telenor sold the former subsidiary Telenor Media, effective as of 1October 2001, and consequently Media was consolidated for the firstnine months of 2001 only. The tables below are included to show theeffect of Telenor Media on the results in the periods where TelenorMedia was consolidated as a subsidiary.

9 months

(NOK in millions) 2001 2000

External revenues 1,258 1,557

Internal revenues 80 98

Gains on disposal of fixed assets and operations 5 -

Total revenues 1,343 1,655

Total operating expenses 1,081 1,354

Operating profit 262 301

Associated companies (12) 6

Net financial items 21 33

Profit before taxes and minority interests 271 340

Investments:

– Capex 56 35

– Acquisition of businesses 127 35


(period end) - 1,908

– Of which abroad - 990

Operating expenses

9 months

(NOK in millions) 2001 2000

External costs of materials and traffic charges 159 250

Internal costs of materials and traffic charges 4 5

Total costs of materials and traffic charges 163 255

Own work capitalized - -

Salaries and personnel costs 406 512

Other external operating expenses 344 389

Other internal operating expenses 117 140

Depreciation and amortization 51 58

Write-downs - -

Losses on disposal of fixed assets and operations - -

Total operating expenses 1,081 1,354

WORKING CAPITAL

Working capital (current assets less current liabilities) was negative byNOK 6.4 billion as of 31 December 2002, negative by NOK 0.8 billion as

of 31 December 2001 and positive by NOK 0.2 billion as of 31 December2000. Telenor believes that taking into consideration establishedcredit facilities and having due regard for the sources of liquidityreserves (including committed credit facilities), credit rating andaccess to capital markets, Telenor has sufficient liquidity and workingcapital to meet present and future requirements. Telenor’s sources ofliquidity are described below.

LIQUIDITY

You should read the cash flow statement in the consolidated financialstatements for detailed figures related to the Group's cash flow.

Net cash flow from operating activities increased in 2002 compared to2001 by NOK 5.9 billion to NOK 12.9 billion. This increase was primarilydue to increased revenues and operating margins and change inaccruals including accounts receivables and prepayments, and waspartly offset by increased payments of taxes and interest. The consoli-dation of DiGi.Com in 2001 and of Pannon GSM and Kyivstar in 2002contributed NOK 3.1 billion of the increase.

Net cash flow from investment activities was a net payment of approxi-mately NOK 21.7 billion, as opposed to a net cash receipt in 2001 ofapproximately NOK 20.9 billion, mainly due to the sale of businesses,including associated companies, and tangible assets in 2001. The levelof cash payments of capital expenditure decreased by approximatelyNOK 2.5 billion in 2002 compared to 2001, but payments for acquisi-tions of businesses (net of cash acquired) increased by approximatelyNOK 6.1 billion in 2002 compared to 2001 mainly due to the acquisitionof the shares of Pannon GSM and Canal Digital which Telenor did notalready own.

In 2002, in order to finance part of the investments in businesses in2002 Telenor increased the interest-bearing liabilities, and as a result,the net cash flow from financing activities was an inflow of approxi-mately NOK 8.6 billion. In 2002, Telenor paid dividends of NOK 0.6 bil-lion, and cash and cash equivalents in foreign currency measured inNOK were negatively affected by approximately NOK 0.3 billion.

At 31 December 2002, Telenor held cash and cash equivalents of NOK5.3 billion, a decrease of approximately NOK 0.6 billion compared to 31December 2001.

INVESTMENTS


Fixed networks 3,001 4,456 3,550

Mobile networks 2,205 1,610 1,054

Satellite networks 15 9 15

Properties 2,840 1,102 680

Support systems (office and computer

equipment, software, cars etc.) 3,042 2,891 2,083

Other intangible assets 455 316 1,381

Work in progress (net additions) and other (2,669) 1,250 1,658

Total Capital expenditure (Capex)1)

8,889 11,634 10,421

Investments in businesses2)

12,411 7,212 40,251

Total 21,300 18,846 50,672

1) Capital expenditure (Capex) is investments in tangible and intangible

assets.2) Investments in businesses are acquisition of shares and participations,

including acquisition of subsidiaries and businesses not organized as

separate companies.


Capital expenditure in 2003 is expected to be in line with 2002 despitethe consolidation of Pannon GSM, Kyivstar and Canal Digital. The actu-al amounts and the timing of the capital expenditure may vary sub-stantially from the estimates.

Investments in Norway totaled NOK 7.9 billion in 2002, of whichNOK 2.5 billion were acquisitions of businesses, including Canal DigitalGroup. Telenor invested NOK 1.1 billion in real estate (including work inprogress) mainly in the new headquarters located at Fornebu outsideof Oslo. Telenor made other investments for a total of NOK 4.3 billion inNorway, including investments in the fixed and mobile networks, equip-ment used in customer contracts and in operational systems andadministrative support systems, of which NOK 0.5 billion was investedin connection with strategic Group projects, including the support sys-tems and IT infrastructure at the new headquarters. The decrease inwork in progress was due mainly to the completion of certain realestate investments and fixed networks in 2002. Investments outsideNorway totaled NOK 13.4 billion in 2002, of which NOK 9.9 billion wereacquisitions of businesses. Total capex outside Norway was NOK 3.5billion in 2002 of which NOK 2.6 billion was capex in DiGi.Com, PannonGSM and Kyivstar.

The table below lists the most significant acquisition of businesses andthe acquisition cost price, including capital contributions to associatedcompanies, for each of the last three years.


Pannon GSM RT. 7,906 - -

COMSAT Mobile Communications 743 - -

Utfors AB 153 - -

Glocalnet AB 102 - -

VIAG Interkom - - 8,103

DiGi.Com bhd - 3,223 599

VimpelCom (incl VimpelCom-Region) 432 255 445

DTAC/UCOM - - 6,548

Telenordia AB - 191 1,313

Connect Austria 44 264 869

Canal Digital 2,166 378 324

Kyivstar G.S.M. JSC 294 254 64

INMARSAT - - 1,546

A-pressen ASA - - 547

Sonofon - - 14,201

Wireless Matrix Corporation - 317 -

Otrum Electronics ASA - 273 -

Sweden On-Line AB - 165 -

Marlink (SAIT Communications S.A) - 189 -

OniWay 217 324 -

Unigrid AB - 122 -

IT operations DnB & Nordea 20 597 287

Fellesdata AS - - 2,528

Nextra Czech – purchase of operations - - 142

XTML/CIX Ltd - - 299

AlfaNETT AS - - 499

Other 334 660 1,937

Total Acquisition of businesses 12,411 7,212 40,251

CAPITAL RESOURCES

Telenor will use cash flow from operations, debt, equity financing andproceeds from potential disposals of assets to finance future invest-ments. Please refer to note 20 and 21 to the consolidated financialstatements for more information related to interest-bearing liabilitiesand note 30 for equity financing and note 28 and 29 for information ofoption plans and employee stock ownership program.

Telenor ASA issue debt in the domestic and international capital mar-kets mainly in form of commercial paper and bonds. In particular,Telenor use the euro commercial paper program, U.S. commercial paperprogram, euro medium term note program and three domestic “openbond programs” with different maturities. In order to establish satisfac-tory access to these funding sources, with respect to both volume andprice, Telenor is dependent on maintaining a satisfactory credit rating.Telenor’s long term and short-term credit rating is A2/P-1 from Moody’sand A-/A-2 from Standard & Poor’s, both with stable outlook.

In order to secure satisfactory financial flexibility, in 2000 Telenorestablished a USD 1.0 billion committed syndicated revolving creditfacility maturing in 2005, and in 2002 a ¤1.0 billion committed syndi-cated revolving credit facility maturing in 2003. The euro facility has aone-year term out option for the amount outstanding as of November2003. According to the financing policy, these committed credit facili-ties should at any time be available to refinance all of Telenor’s out-standing commercial paper.

At the general meeting held on 8 May 2002, it was resolved to renewTelenor’s board of directors’ authority to increase the share capital toNOK 1,064,776,488 by issuing up to 177,462,748 new ordinary shares,nominal value NOK 6 each. The board’s authority expires on 1 July 2003.

As of 31 December 2002, Telenor held 28,103,172 treasury shares. The taxbase cost of the treasury shares is somewhat uncertain, and in Telenor’sopinion this cost equals zero. Thus, if the shares are disposed of for cash, acapital gain may be recognized for tax purposes depending on the consid-eration received. If the shares are swapped against other shares a capitalgain may be deferred by application to the Norwegian Ministry of Finance.No capital gain should arise if the shares are cancelled.


telenor R asa annual report 2002 69

INFORMATION ABOUT CONTRACTUAL CASH PAYMENTS AND GURANTEES

The table below shows the contractual obligations and commercial commitments as well as guarantee liabilities as of 31 December 2002.

Payments due

Less than Over

(NOK in millions) Total 1 year (2003) 2–3 years 4–5 years 5 years

Interest bearing liabilities

Short-term interest-bearing liabilities 3,591 3,591 - - -

Long-term interest-bearing liabilities 26,877 3,240 7,002 9,114 7,521

Capital lease obligations 1,928 442 647 364 475

Committed purchase obligations1)

Rent of premises 3,352 746 971 704 931

Rent of cars, office equipment etc 216 107 85 15 9

Rent of satellite capacity etc 1,845 945 778 85 37

IT related agreements 768 420 332 16 -

Other contractual obligations 1,034 679 346 9 -

Committed investments1)

Associated companies 23 4 19 - -

Properties and equipment 356 348 4 4 -

Other contractual investments 1,325 269 1,056 - -

Total contractual cash obligations 41,315 10,791 11,240 10,311 8,973

Gurantees (expire) 2,515 82 1,572 - 861

1) The table does not include agreements under which Telenor has no binding obligation to purchase or future investments required under the UMTS license

awarded to Telenor in Norway.

You should read note 20 and 21 to the consolidated financial state-ment for additional information on interest-bearing liabilities. Youshould read note 25 for more information on contractual obligationsand commercial commitments and note 23 for Guarantee liabilities.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please refer to Notes 20 and 21 for a description of funding activities inTelenor.

Sensitivity analysis. Telenor adopted sensitivity analysis as theapproach to quantify market risk. Fair values have been estimated inconjunction with the principles described in note 21.

Interest rate risk is quantified by change in fair value given a 10% par-allel shift in interest rate curves. Exchange rate risk is quantified bychange in fair value from a 10% change in spot rates against the Nor-wegian Kroner. Changes in market volatilities will change the fair value

of option instruments. Volatility risk is quantified by change in fairvalue due to a 10% change in implied volatilities.

The model underlying the sensitivity analysis includes derivatives aswell as bank deposits and borrowings, short-term interest bearinginvestments, commercial paper and bonds. The fair values of the equi-ty investments or cash flows from these assets are not taken intoaccount. As such the analysis does not show the total net exposure tofinancial market risk.

The assumptions used in the model for partial movements in risk fac-tors are not based upon empirical observations. Correlations betweendifferent exchange rates, short and long-term interest rates as well asthe interest rates of the different currencies in the portfolio are nottaken into account. As a result, the total effects of deficiencies in theassumptions implicit in the model might be substantial and the hypo-thetical gains and losses calculated do not express management'sexpectations of future changes in fair value.

Fair value as Interest rates Exchange rates Volatility

2002 of 31.12.02 -10 % 10 % -10 % 10 % -10 % 10 %

Foreign exchange derivatives 699 52 (51) (84) 84 - -

Interest rate derivatives (12) 48 (44) 2 (2) (1) 1

Net interest-bearing liabilities (27,880) (344) 321 3,194 (3,194) - -

Total (27,193) (244) 226 3,112 (3,112) (1) 1

Fair value as Interest rates Exchange rates Volatility

2001 of 31.12.01 -10 % 10 % -10 % 10 % -10 % 10 %

Foreign exchange derivatives 905 68 (65) (96) 96 - -

Interest rate derivatives (28) (30) 35 10 (10) - -

Net interest-bearing liabilities (14,383) (153) 141 1,968 (1,968) - -

Total (13,506) (115) 111 1,882 (1,882) - -

The increase in market value of net interest-bearing liabilities as of31 December 2002 compared to 31 December 2001 was primarily dueto acquisitions during 2002. At the end of 2002, Telenor increasedinterest bearing liabilities by NOK 2.4 billion as a result of a tax claimregarding the sale of Sonofon Holding A/S and by an additional NOK0.5 billion as a result of a court case in Greece.

In 2002, the increase in the interest rate sensitivity was mainly due totwo factors. Firstly, the absolute size of net interest bearing liabilitiesincreased resulting in an increase in the quantified interest rate sensi-tivity, holding duration constant. Secondly, the average duration of theportfolio increased from 1.3 to 1.7 years, which also increased the inter-est rate sensitivity of the portfolio.

In 2002 the exchange rate risk quantified in this analysis also increased.Telenor increased the level of net investment hedging as a consequenceof the acquisitions that were made in 2002. Furthermore, as of 31 Decem-ber 2002 Telenor consolidates more subsidiaries that have interest-bear-ing liabilities denominated in other currencies than Norwegian Kroner.

The risk arising from changes in option volatilities is insignificant due tothe small volume of options in the portfolio.

OTHER ISSUES

Critical accounting policies under Norwegian GAAP and

estimates

Certain amounts included in or affecting the financial statements andrelated disclosure must be estimated, requiring Telenor to makeassumptions with respect to values or conditions which cannot beknown with certainty at the time the financial statements are prepared.A "critical accounting policy" is one which is both important to the por-trayal of the company's financial condition and results and requiresmanagement's most difficult, subjective or complex judgments, oftenas a result of the need to make estimates about the effect of mattersthat are inherently uncertain. Telenor evaluates such policies on anongoing basis, based upon historical results and experience, consulta-tion with experts, trends and other methods considered reasonable inthe particular circumstances, as well as forecasts and how these mightchange in the future.

Impairment. Telenor have made significant investments in tangibleassets, goodwill and other intangible assets, associated companiesand joint ventures and other investments. These assets and invest-ments are tested for impairment when circumstances trigger animpairment test. Factors considered important which could trigger animpairment review include the following:

• Significant fall in market values; • Significant underperformance relative to historical or projected

future operating results;• Significant changes in the use of assets or the strategy for the overall

business;• Significant negative industry or economic trends.

The principles for impairment testing are described in the accountingpolicies. For tangible and intangible assets, the assessment is madebased on estimated recoverable amount, which is the higher of esti-mated discounted future cash flow and sales price less cost to sell.When such amounts are less than the carrying amount of the asset, awrite-down to estimated recoverable amount is recorded.

If quoted market prices for an asset or a company are not available, or

the quoted market prices cannot be regarded as fair market value dueto low trading liquidity, fair market value is determined primarily usingthe anticipated cash flows discounted at a rate commensurate with therisk involved. Estimating fair values of assets and companies must inpart be based on management evaluations, including estimates offuture performance, revenue generating capacity of the assets,assumptions of the future market conditions and the success in mar-keting of new products and services. Changes in circumstances and inmanagement's assumptions may give rise to impairment losses in therelevant periods.

Goodwill is reviewed based on an estimated fair value of the reportingunit it refers to. Fair value of the reporting unit is based on quoted mar-ket share price (adjusted to reflect a control premium for those sub-sidiaries where Telenor have effective control) or discounted cashflows of the reporting unit where quoted market share price is notavailable. US GAAP prescribes a two-phase process for impairmenttesting of goodwill. The first phase screens for impairment; if impair-ment is necessary, the second phase measures the impairment. Whenimpairment is identified, the carrying amount of goodwill is reduced toits estimated fair value of the reporting unit.

For the impairment test in accordance with US GAAP, Telenor useundiscounted cash flows, except for goodwill. This did not result in anymaterial difference from the results of the impairment test in accor-dance with Norwegian GAAP as of 31 December 2002.

During 2001 and 2002, the market prices for telecom companies andassets have decreased significantly. In 2001 and 2002, Telenor madesubstantial write-downs of tangible assets, goodwill and other intangibleassets, associated companies and joint ventures and other investments.

Depreciation and amortization. Depreciation and amortization isbased on management estimates of the future economic lifetime of tan-gible and intangible assets. Estimates may change due to technologicaldevelopments, competition, changes in market conditions and other fac-tors and may result in changes in the estimated economic lifetime and inthe amortization or depreciation charges. Telenor shortened the depre-ciation time for some tangible assets in the mobile networks in Malaysiain 2002 and in the Norwegian fixed and mobile networks in 2001.

Business combinations. Telenor is required to allocate the purchaseprice of acquired companies to the tangible and intangible assetsacquired and liabilities assumed based on their estimated fair values.For larger acquisitions, Telenor have engaged independent third-partyappraisal firms to assist in determining the fair values of the assetsacquired and liabilities assumed. Such valuations require managementto make significant estimates and assumptions. The significant pur-chased intangible assets recorded by Telenor include customer con-tracts, brands and licenses. The significant tangible assets includemainly networks.

Critical estimates in valuing certain tangible and intangible assetsinclude but are not limited to: future expected cash flows from customercontracts and licenses, replacement cost for brand and for tangibleassets. Management’s estimates of fair value are based upon assump-tions believed to be reasonable, but which are inherently uncertain andunpredictable and, as a result, actual results may differ from estimates.

Deferred tax assets, valuation allowances for deferred tax assets, and

tax losses. Telenor record valuation allowances to reduce deferredtax assets to an amount that is more likely than not to be realized.


Telenor’s income taxes have been increased by valuation allowances,mainly related to its foreign operations. While Telenor have consideredfuture taxable income and feasible tax planning strategies in determin-ing the amount of the valuation allowances, any difference in theamount that ultimately may be realized would be included as income inthe period in which such a determination is made.

Furthermore, Telenor has not recorded deferred tax assets that may berealized upon possible future disposal of shares in subsidiaries andassociated companies.

To the extent Telenor ASA should dispose of shares in Telenor EiendomHolding AS, or dispose of shares in entities demerged from TelenorEiendom Holding AS, any taxes will be computed on the differencebetween the consideration received and the high tax cost of the sharesdetermined in connection with the in kind contribution prior to the IPOin December 2000. You should read note 13 to the consolidatedfinancial statements.

Telenor has realized significant tax losses on shareholdings, boththrough liquidation and sale of shares to third parties and betweencompanies in the Group. Even though Telenor believes that these taxlosses are tax deductible, in 2002 the Norwegian tax authorities chal-lenged its evaluations in connection with one of the transactions. Youshould read note 13 to the consolidated financial statements.

Pension costs, pension obligations and pension plan assets. Calcu-lation of pension costs and net pension obligations (the differencebetween pension obligations and pension plan assets) are made basedon a number of estimates and assumptions. Changes in and deviationsfrom estimates and assumptions (actuarial gains and losses) affect fairvalue of net pension liabilities, but are not recorded in the financialstatements unless the accumulated effect of such changes and devia-tions exceed 10% of the higher of pension benefit obligations and pensionplan assets at the beginning of the year. From 10% up to 15% the excessamount is recognized in the profit and loss statement over the estimatedaverage remaining service period and any amount in excess of 15% isrecognized over a shorter period of 5 years. Actuarial losses haveincreased in the last three years (starting as of 31 December 1999), andwere estimated to be approximately NOK 0.9 billion as of 31 December2002. The actuarial losses related mainly to Norwegian defined benefitplans, and were approximately 22% of the pension benefit obligations asof 31 December 2002. In 2003, Telenor expect to amortize approximatelyNOK 70 million of these actuarial losses as part of pension costs.

The increase in actuarial losses was mainly due to the reduction in dis-count rate as of 31 December 1999, lower actual return on plan assetsthan estimated due to the reduction in share prices in the last three

years and higher salary increases and pensions adjustments than orig-inally estimated in the latest years. Telenor’s key assumptions for theNorwegian defined benefit plans, which constitute the major part ofthe pension plans, are evaluated each year. The last time Telenordeemed it necessary to revise the assumptions was at the end of 1999,when Telenor, among other things, reduced each of the discount rate,and the expected return on plan assets, by 0.5 percentage points. As of31 December 2002, Telenor’s assumptions were: 6.5% discount rate,7.5% expected return on plan assets, 3.5% rate of compensationincrease, 3.0% expected increase in the social security base amount,3.0% annual adjustments to pensions and a 12-year estimated averageremaining service period. Changes in these assumptions, as well asdeviations from these assumptions and other actuarial assumptions,may affect the estimated net present value of net pension obligations,actuarial gains and losses and future years pension costs

Legal proceedings. Telenor are subject to various legal proceedingsand claims, the outcomes of which are subject to significant uncertain-ty. Telenor evaluates, among other factors, the degree of probability ofan unfavorable outcome and the ability to make a reasonable estimateof the amount of loss. Unanticipated events or changes in these factorsmay require us to increase the amount accrued for any matter oraccrue for a matter that has not been previously accrued because itwas not considered probable.

Inflation

Telenor’s results in recent years have not been substantially affectedby inflation. Inflation in Norway as measured by the consumer priceindex during the years ended 31 December 2000, 2001 and 2002 was3.1%, 3.0% and 1.3% respectively.

Norwegian GAAP compared with US GAAP

Telenor’s consolidated financial statements have been prepared underNorwegian GAAP, which differs from US GAAP in several respects.Telenor have prepared a reconciliation of net income for the yearsended 31 December 2000, 2001 and 2002, and of shareholders' equityas of 31 December 2001 and 2002.

The significant differences between Norwegian GAAP and US GAAPaffecting Telenor’s net income and shareholders equity are describedin Note 31 to the audited consolidated financial statements.

Under US GAAP, net income (loss) for the years ended 31 December2000, 2001 and 2002 would have been NOK 1,082 million, NOK 7,004million and NOK (3,658) million, respectively, as compared to NOK1,076 million, NOK 7,079 million and NOK (4,298) million, respectively,under Norwegian GAAP.



CONSOLIDATED STATEMENT OF PROFIT AND LOSSTelenor Group 1 January – 31 December

(in NOK millions except per share amounts) Note 2002 2001 2000

Revenues 2 48,668 40,604 36,530

Gains on disposal of fixed assets and operations 2 158 5,436 1,042

Total revenues 48,826 46,040 37,572

Operating expenses

Cost of materials and traffic charges 4 12,485 10,204 9,606

Own work capitalized 5 (567) (1,002) (1,544)

Salaries and personnel costs 6,7 10,104 10,128 10,513

Other operating expenses 8,9 13,188 12,397 9,376

Losses on disposal of fixed assets and operations 147 63 58

Depreciation and amortization 14,15 10,236 7,251 5,821

Write-downs 14,15 3,553 3,822 113


Operating profit (loss) (320) 3,177 3,629

Associated companies 16 (2,450) 8,237 (692)

Financial income and expenses

Financial income 567 897 828

Financial expenses (1,833) (1,396) (1,921)

Net currency gain (loss) (311) (402) (64)

Net gain (loss) and write-downs of financial items (789) (258) 223

Net financial items 12 (2,366) (1,159) (934)

Profit (loss) before taxes and minority interests (5,136) 10,255 2,003

Taxes 13 480 (3,897) (861)

Profit (loss) before minority interests (4,656) 6,358 1,142

Minority interests 358 721 (66)

Net income (loss) (4,298) 7,079 1,076

Net income (loss) per share in NOK (basic), excluding treasury shares (2.422) 3.994 0.754

Net income (loss) per share in NOK (diluted), excluding treasury shares (2.422) 3.990 0.754


CONSOLIDATED BALANCE SHEETTelenor Group at 31 December

(in NOK millions) Note 2002 2001

Assets

Deferred tax assets 13, 14 4,866 600

Goodwill 14 10,100 7,439

Other intangible assets 14 4,945 2,161

Tangible assets 15 41,002 37,608

Financial assets 16 13,249 18,287

Total fixed assets 74,162 66,095

Inventories 632 513

Current receivables, etc 17 8,868 9,701

Short-term investments 18 532 475

Cash and cash equivalents 27 5,264 5,839

Total current assets 15,296 16,528

Total assets 89,458 82,623

Equity and liabilities

Shareholder’s equity 33,685 42,144

Minority interests 3,603 3,539

Total equity and minority interests 37,288 45,683

Liabilities

Provisions 19 1,176 761

Long-term interest-bearing liabilities 20, 21 28,805 18,497

Long-term non-interest-bearing liabilities 22 473 388

Total long-term liabilities 29,278 18,885

Short-term interest-bearing liabilities 20 3,591 672

Short-term non-interest-bearing liabilities 22 18,125 16,622

Total short-term liabilities 21,716 17,294

Total equity and liabilities 89,458 82,623

Mortgages 23 9,892 5,000

Guarantee liabilities 23 2,515 2,719

Contingent liabilities 24

Oslo, 19 March 2003

Thorleif Enger Åshild M. Bendiktsen Hanne de Mora Einar Førde Jørgen LindegaardChairman of the Board Vice-chairman of Board member Board member Board member

of Directors the Board of Directors

Bjørg Ven Harald Stavn Per Gunnar Salomonsen Irma TystadBoard member Board member Board member Board member

Jon Fredrik Baksaas

President & CEO


CONSOLIDATED CASH FLOW STATEMENTTelenor Group 1 January – 31 December

(in NOK millions) 2002 2001 2000

Proceeds from sale of goods and services 50,480 39,771 35,684

Payments to suppliers of goods and services and of other operating expenses (25,056) (22,234) (16,781)

Payments to employees, pensions, social security tax, tax deductions (9,643) (9,186) (9,919)

Interest etc. received 796 739 658

Interest etc. paid (1,629) (1,405) (1,950)

Other proceeds and payments related to operating activities (142) 366 439

Payment of taxes and public duties (1,948) (1,058) (2,216)

Net cash flow from operating activities1)

12,858 6,993 5,915

Proceeds from sale of tangible and intangible assets 210 1,413 435

Purchase of tangible and intangible assets (9,098) (11,558) (8,566)

Cash receipts from sale of subsidiaries and associated companies, net of cash sold 191 37,919 3,032

Cash payments on purchase of subsidiaries and associated companies, net of cash received (12,232) (6,125) (39,289)

Proceeds from sale of other investments 271 314 759

Payments for other investments (1,069) (1,072) (3,679)

Net cash flow from investment activities (21,727) 20,891 (47,308)

Proceeds from long-term liabilities 19,567 4,199 43,948

Proceeds from short-term liabilities 184 442 14,974

Payments on long-term liabilities (10,140) (28,103) (18,512)

Payments on short-term liabilities (549) (482) (15,027)

Proceeds from issuance of shares to minorities in subsidiaries 181 89 1,589

Proceeds from issuance of shares 19 21 15,168

Purchase of own shares from and dividend paid to minorities in subsidiaries - - (82)

Payment of dividends (621) (532) (500)

Net cash flow from financing activities 8,641 (24,366) 41,558

Effect on cash and cash equivalents of changes in foreign exchange rates (347) 15 17

Net change in cash and cash equivalents (575) 3,533 182

Cash and cash equivalents at 1 January 5,839 2,306 2,124

Cash and cash equivalents at 31 December 5,264 5,839 2,306

1) Reconciliation:

Net income (4,298) 7,079 1,076

Minority interests (358) (721) 66

Taxes (480) 3,897 861

Profit before taxes and minority interests (5,136) 10,255 2,003

Taxes paid (2,050) (1,173) (1,643)

Net gain/loss including write-downs of financial items 778 (5,115) (1,207)


Associated companies 2,450 (8,237) 692

Changes in inventories (39) 32 (38)

Changes in accounts receivable and prepayments from customers 1,593 (368) (207)

Changes in accounts payable and prepaid expenses 126 (436) 529

Difference between expensed and paid pensions 359 (106) (111)

Currency losses not relating to operating activities 391 367 48Change in other accruals 597 701 (85)

Net cash flow from operating activities 12,858 6,993 5,915


CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITYTelenor Group

Other Cumulative

Share paid Other translation Treasury

Nom Capital capital equity adjustment shares Total

Number Amount (NOK (NOK (NOK (NOK (NOK (NOK

of shares (NOK) mill.) mill.) mill.) mill.) mill.) mill.)

Balance as of

31 December 1999 1,400,000,000 6 8,400 5,600 6,021 12 20,033

Net income for the year 2000 1,076 1,076

Dividends (532) (532)

Translation adjustments (349) (349)

Share dividend issue 30,000,000 6 180 (180) -

Share issue 372,151,899 6 2,233 13,013 15,246

Treasury shares 180 (180) -

Balance as of

31 December 2000 1,802,151,899 6 10,813 18,613 6,565 (337) (180) 35,474

Net income for the year 2001 7,079 7,079


Translation adjustments 192 192

Employee share issue 578,753 6 3 17 20

Distribution of treasury shares 6 (11) 11 -

Balance as of

31 December 2001 1,802,730,652 6 10,816 18,619 13,023 (145) (169) 42,144

Net income for the year 2002 (4,298) (4,298)


Translation adjustments (2,723) (2,723)

Employee share issue 695,520 6 4 15 19

Consolidation Canal Digital (658) (658)

Balance as of

31 December 2002 1,803,426,172 6 10,820 18,634 7,268 (2,868) (169) 33,685

2002 2001 2000

Average number of shares primary (exclusive treasury shares) 1,774,637,008 1,772,330,267 1,426,509,450

Average number of shares fully diluted (exclusive treasury shares) 1,774,637,008 1,774,086,782 1,426,649,837

Dividend per share in NOK 0.45 0.35 0.30

The dilutive effect on the average number of shares relates to the share bonus program in 2001. Please see note 30 for furtherinformation.

In 2002 shareholders’ equity decreased by NOK 658 million in connection with the consolidation of Canal Digital. As of 30 June2002 the acquisition of the remaining 50% of Canal Digital was completed and Telenor obtained effective control. Due to thetransfer of risk for the company’s results of operations at the time of entering into the agreement to acquire Canal Digital inJune 2001, 50% of the company’s loss, amortization of net excess values and calculated financing expenses in the periodbetween the agreement and consolidation has been recorded directly against the shareholder’s equity.

Equity available for dividends from Telenor ASA was NOK 7,652 million as of 31 December 2002.

Minority interests

Minority Minority Minority Minority Minority

Minority part of part of part of interests interests

share in net income net income net income in the balance in the balance

(in NOK millions) % 31.12.02 (loss) 2002 (loss) 2001 (loss) 2000 sheet 31.12.02 sheet 31.12.01

Telenor Venture AS 36.3 (6) (83) 22 65 71

Telenor Venture II ASA 49.0 (67) (7) - 143 136

Kyvistar G.S.M. JSC 45.8 51 - - 787 -

OJSC Comincom/Combellga 25.0 15 6 3 160 192

DiGi.com bhd 39.0 47 44 - 1,113 1,386

GrameenPhone Ltd1) 53.6 162 126 53 328 247

EDB Businesspartner ASA 48.2 (555) (764) 13 914 1,469

Other (5) (43) (25) 93 38

Total (358) (721) 66 3,603 3,539

1) Telenor has a voting interest of 51 % in GrameenPhone Ltd.

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLESTelenor Group

General

When Telenor AS was established as a public company on 31 October 1994, assets and liabilities were transferred at their car-rying values as recorded in the final records of the Norwegian State Administration, except for required adjustments to complywith Norwegian generally accepted accounting principles (Norwegian GAAP).

The Norwegian Government formed Telenor ASA in July 2000 to act as the holding company for the Telenor Group. In October2000, the Norwegian Government contributed all of the shares of Telenor AS (subsequently renamed Telenor CommunicationsAS), the former holding company for the Telenor Group, to Telenor ASA in exchange for all of the issued shares of Telenor ASA.Telenor ASA was formed with identical share capital as Telenor AS, and prior to its acquisition of Telenor AS had no assets or lia-bilities and conducted no operations other than those incidental to its formation. For purposes of these consolidated financialstatements, Telenor ASA is treated as if it had been the parent company of the Telenor Group for all periods presented.

The consolidated financial statements for Telenor ASA and its subsidiaries (the Group) are prepared in accordance with Nor-wegian GAAP. The Group's accounting principles differ, in certain respects, from United States generally accepted accountingprinciples (US GAAP). The differences and the related effects on the Group's net income, shareholder's equity, revenues andtotal assets are set forth in note 31.

Consolidation principles

The Group consolidated accounts include Telenor ASA and subsidiaries in which Telenor ASA has effective control. Subsidiariesare consolidated from the moment effective control is obtained. Effective control generally exists when Telenor has more than50% ownership.

Successive share purchases are treated separately when the successive purchases are small, fair value has increased signifi-cantly or a long time has passed since the previous share purchase.

All significant intercompany transactions and balances have been eliminated.

Investments in joint ventures and entities in which Telenor has an equity ownership interest normally of 20 to 50% and exercis-es significant influence are accounted for using the equity method.

Investments considered to be of a temporary nature are accounted for at cost.

Increase in minority interest from a subsidiary's equity transactions and sale of shares in a subsidiary are recorded at fair valueas minority interest. The difference between the minority interest measured at fair value and the recorded equity in the sub-sidiary is amortized or written down through allocating results to minority.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net of tangible and intangible assets acquired andliabilities incurred in business combinations. Goodwill is amortized on a straight-line basis over the estimated useful economiclife, based on an individual assessment.


Revenue recognition

Revenues are primarily comprised of traffic fees, subscription and connection fees, interconnection fees, fees for leased linesand leased networks, fees for data network services, fees for TV distribution and satellite services, IT service, installation andsale of customer equipment. Revenues from directory advertising activities of Telenor Media are included up to 1 October2001, the effective date for the sale of this subsidiary.

For PSTN/ISDN, mobile telephony, leased lines, TV distribution, satellite services and other network based services, traffic rev-enues and interconnection revenues are recognized based on actual traffic while subscription fees, including ADSL, are recog-nized as revenue over the subscription period. Revenues related to prepaid phone cards are deferred and recorded as revenuebased on the actual use.

Revenues from connection fees that are received from the sale of new subscriptions are recognized at the time of sale to theextent of direct costs incurred. Direct costs incurred in connection with mobile connection revenues consist primarily of the firstpayment of distributor commission, costs for credit check, cost of the SIM card and the cost of the printed new customer infor-mation package. For the fixed line connection revenues, the direct costs consist primarily of installation work and expenses forcustomer care. To date, direct costs associated with mobile and fixed line connection fees have exceeded such revenues.

Revenues from sale of customer equipment and IT service and installation are recognized when products are delivered orwhen services are rendered to customers. Revenues from sale of equipment which are delivered together with services arerecognized at the time of delivery of the equipment when the delivery of the equipment can be separated from the delivery ofthe services. If the delivery of equipment cannot be separated from the sale of services, revenue from equipment is recognizedwhen revenue from services are recognized. Revenues from operating services are recognized on the basis of actual use forvolume-based contracts, and on a linear basis over the contract period for term-based contracts. Revenues from softwarelicenses are recognized when delivered. Revenues from software developed specifically for customers are recognized over thedevelopment period in line with the percentage of completion.

Revenues from directory advertising were recognized when the directories were published.

Revenues are normally reported gross with a separate recording of expenses to vendors of products or services. However, whenTelenor only acts as an agent or broker on behalf of suppliers of products or services, revenues are reported on a net basis.

Pensions

Defined benefit plans are valued at the present value of accrued future pension benefits at the balance sheet date. Pensionplan assets are valued at their fair value. Changes in the pension obligations due to changes in pension plans are recognizedover the estimated average remaining service period (12 years). Accumulated effect of changes in estimates, changes inassumptions and deviations from actuarial assumptions (actuarial gains or losses) that is less than 10% of the higher of pen-sion benefit obligations and pension plan assets at the beginning of the year is not recorded. When the accumulated effect isbetween 10% and 15% the excess amount is recognized in the profit and loss statement over the estimated average remainingservice period. Accumulated effects above 15% are recognized in the profit and loss statement over 5 years. The net pensioncost for the period is classified as salaries and personnel costs.

Research and development costs

Research and development costs are expensed as incurred.

Software costs

Direct development costs associated with internal-use software are capitalized and amortized. This includes external directcosts of material and services and payroll costs for employees devoting time to the software projects.

Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

Leases

Capital leases, which provide the Group with substantially all the rights and obligations of ownership are capitalized as fixedassets. The capital lease liabilities are valued at the present value of minimum lease payments.

Foreign currency transactions

Transactions involving foreign currencies are translated into Norwegian Kroner using the prevailing exchange rates at the timeof the transactions. Financial instruments denominated in foreign currencies are translated using period end exchange rates.The resulting gain or loss is charged to financial items for the period, unless hedge accounting is applied.

Foreign currency translation and hedge accounting for net investments

The financial statements of the Group's foreign operations are maintained in the currency in which the entity primarily con-ducts business. When translating financial statements for foreign entities (subsidiaries, associated companies and joint ven-


tures) from local currencies to Norwegian Kroner, assets and liabilities are translated using year-end exchange rates andresults are translated using the average exchange rates for the reporting period. The resulting translation adjustments, andthe gains and losses on financial instruments designated and proven effective as hedges of net investments in foreign entities,are reported as a component of shareholder's equity.

For entities located in countries defined as highly-inflationary and with financial reporting in local currency, fixed assets and relat-ed depreciation are remeasured to functional currency using the exchange rate at the date of acquisition. Other balance sheetitems are remeasured at the year-end exchange rate. Other profit and loss items are translated using the average exchange ratesfor the reporting period. The gain or loss resulting from these remeasurements is charged to income for the period.

Derivatives and hedge accounting for interest-bearing liabilities and firm commitments

For interest-bearing liabilities Telenor does not recognize changes in fair value due to changes in interest rates.

Telenor uses derivatives to manage its exposure to fluctuations in exchange rates and interest rates. Instruments used are inter-est rate swaps, interest rate options, forward rate agreements, cross currency swaps and foreign currency forward contracts.

To qualify for hedge accounting, the instruments must meet pre-defined correlation criteria. This involves prospective docu-mentation that justifies expectations that the hedge will be effective in the future, as well as assessment of sufficient hedgeeffectiveness during the lifetime of the hedge. It is a requirement that the hedges generate financial statement effects whichsubstantially offset the position being hedged.

For interest rate derivatives that qualify for hedge accounting, Telenor does not recognize unrealized changes in fair value due tochanges in interest rates. Amounts to be paid or received under interest rate swaps and cross currency interest rate swaps that aredesignated and effective as a hedge of interest bearing liabilities are accrued as interest income or expense, respectively.

Exchange rate effects on currency swaps designated as hedges of interest-bearing assets or liabilities are recorded as foreignexchange gain or loss and included in the carrying value of the hedged item. Foreign currency forward contracts are marked tomarket and changes in fair value are recorded as foreign exchange gain or loss.

Gains and losses on foreign exchange contracts that are designated as hedges of firm commitments are deferred and recognizedin income at the same time as the related transactions, provided that the hedged transaction is eligible for hedge accounting.

Gains and losses on termination of hedge contracts are recognized in income when terminated in conjunction with the termi-nation of the hedged position, or to the extent that such position remains outstanding, deferred and amortized to income overthe original hedging period.

Derivatives that do not meet the hedging criteria are recorded at their market value with the resulting gain or loss reflectedunder financial items.

Taxes

Deferred tax assets and liabilities are calculated with full allocation for all temporary differences between the carrying amountof assets and liabilities in the financial statements and for tax purposes, including tax losses carried forward. The enacted taxrates at the balance sheet date and normal undiscounted amounts are used. Deferred tax assets are recorded in the balancesheet to the extent it is more likely than not that the tax assets will be utilized. Deferred tax assets which will be realized uponsale or liquidation of companies are not recorded until realization or liquidation is decided.

Cash and cash equivalents

Cash and cash equivalents include cash, bank deposits, fixed rate bonds and commercial paper with original maturity of threemonths or less.

Investments

For shares classified as current assets and managed as a whole, adjustments in the book value are only made if the aggregat-ed holdings have a lower estimated fair value than the original cost. Other current shares are valued at the lower of cost andestimated fair value.

Long-term shares and other investments, excluding shares in associated companies and joint ventures are valued at historicalcost or, if lower, estimated fair value if the fall in value is not temporary.

For investments in associated companies and joint ventures, a loss in value which is other than a temporary decline is recognized.

Impairment is assessed when changes in circumstances indicate that the carrying amount of the investments may not berecoverable. This may be indicated by a fall in market values or revised earnings forecasts for the individual companies. When


evaluating if a decline in value has occurred and if the decline is other than temporary, several factors are considered, includ-ing discounted cash flows, quoted share prices (if available), market values of similar companies and third party evaluationswhere appropriate.

Inventories

Inventories are valued at the lower of cost or market price. Cost is determined using the FIFO method.

Advertising costs, marketing and sales commissions

Advertising costs, marketing and sales commissions are expensed as incurred.

Tangible assets, intangible assets, depreciation and amortization

Tangible and intangible assets are carried at historical cost less accumulated depreciation and amortization. Interest has beencapitalized on assets under construction.

Impairment of tangible and intangible assets is assessed when changes in circumstances indicate that their carrying amountmay not be recoverable. The assessment is made based on estimated recoverable amount, which is the highest of estimateddiscounted future cash flows and sales price less cost to sell. When such amounts are less than the carrying amount of theasset, a write-down to estimated recoverable amount is recorded.

Tangible assets are, for the most part, depreciated on a straight-line basis over their expected economic useful lives using thefollowing rates:Office machinery and equipment, software: 20–33%Satellites, computer equipment, software at switches and other equipment: 10–20%Transmission and equipment related to switches: 10–33%Cable and power supply installations: 6–8%Buildings: 3–4%

Intangible assets are amortized over the expected economic useful life, mainly on a straight-line basis.

Options and employee stock ownership program

For options that have an intrinsic value when they are granted a compensation expense is recognised over the estimatedoption period. Options with no intrinsic value as of grant date are not expensed. Social security tax on options is recorded overthe estimated option period. Discounts in the employee stock ownership program has been recorded as salaries and personnelcosts when the discount is given. Payment from employees for shares which are issued by Telenor ASA under the option planor the employee stock ownership program is recorded as increase in shareholders equity. Payment from employees for shareswhich are issued under the subsidiaries option plans are recorded as increase in minority interests.

Use of estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contin-gent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses duringthe reporting period.

Actual results could differ from those estimates.

Changes in classification

In 2001, some adjustments related to gross/net reporting of revenues and expenses were made. The changes had no materialeffect on the accounts. The adjustments were mainly related to accounting for dealer commissions for prepaid cards and forsome content. Dealer commission is now recorded as an expense instead of a reduction of revenue. Commissions are expensedas incurred. Revenues and related other operating expenses were increased with NOK 204 million, and NOK 169 million for2001 and 2000 respectively. In addition accrued expenses of NOK 42 million was expensed in 2001 related to this change. Thischange affected our Mobile business area.

Payment from content sold on behalf of external content providers has been recorded as a reduction in revenues from 2001.Previously this was recorded gross as revenues and expenses respectively. Revenue and related cost of materials weredecreased with NOK 332 million and NOK 241 million for 2001 and 2000 respectively. These changes affected our Mobile andNetworks business areas.

In 2000, revenues and cost of materials related to programming revenues and expenses for TV distribution were adjusted andis now recorded gross. Revenues and related cost of materials increased by NOK 104 million for 2000. This change affectedour Plus business area.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACQUISITIONS AND DISPOSALS

During the three years ended 31 December 2002, Telenor entered into the following significant acquisitions and disposals.Each acquisition was recorded using the purchase method of accounting. The summary does not include capital increases orother types of financing by Telenor.

Significant Acquisitions in 2002:

Change in Net

(in NOK millions) interest Purchase excess Amortization

Company Country % Business price value period

Pannon GSM RT. Hungary 74.2 Mobile Communication 7,906 7,741 5–20 years

Canal Digital Norway5) 50.0 TV-distribution 2,166 2,244 5–15 years

Kyivstar G.S.M. JSC6) Ukraine 8.8 Mobile Communication 294 1,0057) 5–20 years

COMSAT Mobile Communications2) USA 100.0 Satellite Mobile Communications 743 22 10 years

Utfors AB1) 4) Sweden 90.0 Telecommunication 153 (351) 18 years

Glocalnet AB4) Sweden 37.2 Telecommunication 102 50 3) 10 years

VimpelCom-Region Russia 17.5 Mobile Communication 432 - -

1) Telenor holds convertible loans, which may increase the ownership share up to 96%. Net excess value is preliminary recorded as neg-

ative goodwill.2) Asset purchase agreement. 3) Net excess value is included in the book value of associated companies and joint ventures.4) Preliminary evaluations and allocations. 5) The parent company is Norwegian. Canal Digital Group conducts business in the Nordic region via subsidiaries.6) Telenor has an option to acquire a further 2.3% of the share capital.7) Includes minority share of NOK 553 million.

Acquisition of Pannon GSM, Kyivstar and Canal Digital in 2002

On 4 February 2002, Telenor acquired an additional 74.2% of the outstanding common shares in Pannon GSM. After comple-tion of the acquisition, Telenor owns 100% of the outstanding common shares and the result of Pannon GSM operations havebeen included in the consolidated financial statements from that date. Pannon GSM is one of the leading mobile operators inHungary and offers high quality GSM voice and data communication services on 900 and 1800 MHz frequency. This acquisitionis part of Telenor's strategy to gain control of operations to take advantage of synergies stemming from coordinated activitiesin a number of markets. The aggregate purchase price was approximately NOK 8 billion and was paid in cash. The value was setbased on a fair value after negotiations between the parties. The allocation of the purchase price has been based on inde-pendent financial experts estimates of the fair values of assets and liabilities acquired.

On 30 June 2002, Telenor acquired an additional 50% of the outstanding common shares in Canal Digital. After completion ofthe acquisition, Telenor owns 100% of the outstanding common shares and the result of Canal Digital operations have beenincluded in the consolidated financial statements from that date. As a result of the transfer of risk for the company’s operatingresults at the time of entering into the agreement in June 2001, 50% of the Canal Digital’s loss, amortization of net excess val-ues and calculated financing expenses in the period between agreement and consolidation has been recorded directly againstthe shareholders’ equity in 2002. Canal Digital distributes subscription based satellite broadcasting to households based onsmart cards and to cable-TV operators. Furtermore, the company delivers solutions for distribution and management. Theaggregate purchase price was approximately NOK 2.2 billion and was paid in cash. This acquisition is part of Telenor's strategyto gain control of operations to take advantage of synergies stemming from coordinated activities in a number of markets. Thevalue was set based on a fair value after negotiations between the parties. The allocation of the purchase price has beenbased on independent financial experts estimates of the fair values of assets and liabilities acquired.

In 2002, Telenor acquired an additional 8.8% of the outstanding common shares in Kyivstar. After completion of the acquisi-tion, Telenor owns 54.2% of the outstanding common shares and the result of Kyivstar operations have been included in theconsolidated financial statements from 1 September 2002. Telenor has an option to acquire a further 2.3% of the share capi-tal. Kyivstar is a leading mobile operator in the Ukraine and offers high quality GSM voice and data communication services on900 and 1800 MHz frequency. This acquisition is part of Telenor's strategy to gain control of operations to take advantage ofsynergies stemming from coordinated activities in a number of markets. The aggregate purchase price was approximately NOK0.3 billion and was paid in cash. The value was set based on a fair value after negotiations between the parties. The allocationof the purchase price has been based on independent financial experts estimates of the fair values of assets and liabilitiesacquired.


The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the dates of consolidation1):

Pannon GSM Canal Digital Kyivstar

4 February 2002 30 June 2002 1 September 2002

Deferred tax assets - 128 31

Goodwill 5,613 1,988 371

Other intangible assets 2,626 298 956

Tangible assets and financial fixed assets 2,517 636 1,644

Current assets 1,102 520 271

Total assets 11,858 3,570 3,273

Deferred taxes 308 63 153

Long-term liabilities 1,793 653 740

Short-term liabilities 1,121 981 840

Total liabilities 3,222 1,697 1,733

Minority interest - - 671

Net assets at the date of consolidation 8,636 1,873 869

Book value as an associated company at the date of consolidation (730) (365) (575)

Recorded directly against equity - 658 -

Purchase price last acquisition 7,906 2,166 294

1) These figures include consideration for the last acquisitions and the carrying values for the prior investments, when the companies

were accounted for as associated companies.

Total other intangible assets of Pannon GSM were NOK 2,626 million at the date of consolidation, of which NOK 2,128 millionrelates to identified intangible assets in Telenor's latest acquisition. Of this amount NOK 1,727 million was assigned to cus-tomer relationship (5 years average useful life) and NOK 275 million was assigned to trademarks (10 years average useful life)and NOK 126 million to licenses (6-12 years average useful life).

Goodwill of NOK 5,613 million relates to the Mobile Business area with a useful life of 20 years. Goodwill on prior acquisitions isamortized according to original plan.

Total other intangible assets of Canal Digital were NOK 298 million at the date of consolidation, of which NOK 227 millionrelates to identified intangible assets in Telenor's latest acquisition. Of this amount NOK 111 million was assigned to customerrelationship (5 years average useful life) and NOK 116 million was assigned to trademarks (15 years average useful life).

Goodwill of NOK 1,988 million relates to the Plus Business Area with a useful life of 15 years. Goodwill on prior acquisitions isamortized according to original plan.

Total other intangible assets of Kyivstar were NOK 956 million at the date of consolidation, of which NOK 635 million relates toidentified intangible assets in Telenor's latest acquisition. Of this amount NOK 522 million was assigned to customer relation-ship (5 years average useful life) and NOK 48 million was assigned to licenses (9 years average useful life) and NOK 65 millionwas assigned to trademarks (10 years average useful life).

Goodwill of NOK 371 million relates to the Mobile Business Area with a useful life of 20 years. Goodwill on prior acquisitions isamortized according to original plan.

Pro forma information (unaudited)

The following unaudited pro forma financial information presents results as if the acquisition of Pannon GSM, Kyivstar, CanalDigital, COMSAT and Utfors had occurred at the beginning of the respective periods:

(in NOK millions, except per share data) 2002 2001

Pro forma revenues 52,023 53,999

Profit before taxes and minority interests (5,693) 8,322

Pro forma net income (4,854) 5,487

Pro forma net income per share in NOK (2.735) 3.096

The pro forma results are adjusted for Telenor's interest expenses and amortization of excess values and the results in theperiod prior to the acquisitions. These pro forma figures have been prepared for comparative purposes only and are not nec-essarily indicative of the results of operations which actually would have resulted had the acquisitions been in effect in therespective periods or of future results.


Significant Disposals in 2002

There were no significant disposals in 2002.

Significant Acquisitions in 2001

Change in Net



DiGi.Com bhd Malaysia 28.1 Mobile Communication 3,223 3,003 3–20 years

VimpelCom Russia 1) Mobile Communication 255 - -

Otrum Electronics ASA Norway 33.1 TV-distribution 266 912) 10 years

Sweden On-Line AB Sweden 100.0 TV-distribution 165 130 10 years

Telenordia AB Sweden 50.0 Telecommunication 130 115 0.5–1 year

SAIT Communications S.A Belgium 100.0 Satellite Mobile Communications 189 180 10 years

DnB IT-operations Norway 100.0 Operation services 597 390 7 years

Unigrid AB Sweden 100.0 Operation services 122 97 10 years

Accept Data AS Norway 100.0 Information technology 65 56 10 years

Wireless Matrix Corporation Canada 30.8 Mobile Communication 317 2252) 3 years

1) Telenor reduced its ownership share through a share issue in VimpelCom, and acquired shares to maintain the voting interest of 25%.2) Net excess value is included in the book value of associated companies and joint ventures.

On 1 September 2001, Telenor acquired an additional 28.1% of the outstanding common shares in DiGi.Com. After completion ofthe acquisition Telenor owns 61% of the outstanding common shares and the results of DiGi.Com operations have been includedin the consolidated financial statements since that date. Under current Malaysian law Telenor is required to reduce its ownershipinterest in DiGi.Com to below 50% by 2006. DiGi.Com is a leading telecommunications service provider in Malaysia with a fullrange of telecommunications-related services. DiGi.Com is Malaysia's market leader in prepaid services. This acquisition is partof Telenor's strategy to gain control of operations to take advantage of synergies stemming from coordinated activities in anumber of markets. The aggregate purchase price was NOK 3.2 billion and was paid in cash. The value was set based on thestock price through a partial tender offer.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the dates of consol-idation1):

(in NOK millions) DiGi.Com 1 September 2001

Goodwill 3,835

Other intangible assets 773

Tangible assets and financial assets 4,271

Current assets 794

Total assets 9,673

Long-term liabilities 1,727

Short-term liabilities 968

Total liabilities 2,695

Minority interests 1,316

Net assets at the date of consolidation 5,662

1) These figures include consideration for the last acquisition and the carrying value for the prior investment, when the company was

accounted for as an associated company.

Total intangible assets of DiGi.Com was NOK 773 million at the date of consolidation, of which NOK 668 million relates to iden-tified intangible assets in Telenor's latest acquisition. Of this amount NOK 302 million was assigned to customer relationship(3–5 years average useful life), NOK 199 million was assigned to licenses (15 years average useful life) and NOK 167 millionwas assigned to trademarks (10–20 years average useful life).

Goodwill of NOK 3,835 million relates to the Mobile Business Area with a useful life of 20 years.


The following unaudited pro forma financial information presents results as if the acquisition of DiGi.Com had occurred at thebeginning of the respective periods:


(in NOK millions, except per share data) 2001 2000

Pro forma revenues 47,678 39,403

Profit before taxes and minority interests 10,122 1,809

Pro forma net income 6,922 830

Pro forma net income per share in NOK 3.905 0.582

The pro forma results are adjusted for Telenor's interest expenses and amortization of excess values and the results inDiGi.Com in the period prior to the acquisition. These pro forma figures have been prepared for comparative purposes only andare not necessarily indicative of the results of operations which actually would have resulted had the purchase of DiGi.Combeen in effect at the respective periods or of future results.


In January 2001, Telenor sold Norcom Networks Communications Inc. in exchange for shares in the listed company WirelessMatrix Corporation. A gain of NOK 259 million before taxes was recorded.

In January 2001, Telenor sold its 10% ownership interest in VIAG Interkom and recorded a gain before taxes of NOK 10.7 billion.The cash consideration was NOK 20.7 billion.

In April 2001, Telenor sold its 49.5% ownership interest in Esat Digifone and recorded a gain before taxes of NOK 10.7 billion.The cash consideration was NOK 11.4 billion.

Telenor sold the business area Telenor Media with effect from 1 October 2001. A gain of NOK 5.0 billion before taxes wasrecorded. The cash consideration was NOK 5.8 billion. The disposal was in line with the strategy to dispose of non-corebusiness.

Set forth below is the split between the continued and the discontinued operations of Telenor Media:

(in NOK millions except per share data) 2001 2000

Net income for Telenor Media 187 228

Gain on sale of Telenor Media 5,000 -

Tax on gain on sale of Telenor Media (72) -

Effect on net income of discontinued operations 5,115 228

Net income for Telenor Group 7,079 1,076

Net income from continued operations (excluding Telenor Media) 1,964 848

Net income per share in NOK from discontinued operations (Telenor Media) 2.886 0.160

Net income per share in NOK from continued operations (excluding Telenor Media) 1.108 0.594

Significant Acquisitions in 2000

Change in Net



OJSC Comincom/Combellga Russia 67.5 Fixed network 806 721 5-20 years

Telenordia AB Sweden 16.7 Fixed network, internet 1,239 1,0701) 10 years

DiGi.Com bhd Malaysia 2.9 Mobile telecommunication 393 3291) 15 years

Fellesdata AS Norway 100.0 Information Technology 2,528 2,421 20 years

Sonofon Holding A/S Denmark 53.5 Mobile telecommunication 14,201 14,570 5-20 years

Total Access Communication PCL Thailand 29.9 Mobile telecommunication 4,828 3,350 5-20 years

United Communication Industry PCL Thailand 24.9 Mobile telecommunication 1,720 1,3821) 5-20 years

Canal Digital Norge AS Norway 16.0 TV-distribution 170 1721) 10 years

BDC AS Norway 62.0 Information Technology 67 62 10 years

XTML Ltd UK 80.9 Internet 229 337 5 years

CIX Ltd UK 100.0 Internet 70 78 5 years

alfaNETT AS Norway 100.0 TV-distribution 499 415 10 years

EuroCom Holding Aps Denmark 75.0 Information Technology 83 83 5 years

1) Net excess value is included in the book value of associated companies and joint ventures.


Telenor disposed of its ownership in Storm Communications Ltd. in the beginning of 2000 and recorded a gain of NOK 309 mil-lion before taxes. Telenor Inkasso AS and Telenor Finans AS were also sold for total gains of NOK 138 million.

Telenor reduced the ownership in the associated company Cosmote S.A. to 18% and recorded a gain of NOK 913 million before


tax. In connection with this transaction Telenor increased its ownership in Telenor B-Invest to 100%. Telenor B-Invest ownsTelenor's shares in Cosmote.

Telenor reduced its ownership interest in Scandinavian Online AB and recorded a gain of NOK 205 million before taxes.

Bravida AS was merged with a holding company of BPA AB and is being accounted for as an associated company with effect from 1November 2000. Telenor's ownership interest was 49.71% as of 31 December 2000. No gain was recorded in this transaction.


The following unaudited pro forma financial information presents results as if the acquisition of the subsidiaries in the tableabove for 2000 had occurred at the beginning of 2000:

(in NOK millions, except per share data) 2000

Pro forma revenues 38,277

Pro forma net income 788

Pro forma net income per share in NOK 0.553

The pro forma net income is adjusted for Telenor's interest expenses and amortization of excess values and the net income inthe companies in the period prior to the acquisitions. These pro forma figures have been prepared for comparative purposesonly and are not necessarily indicative of the results of operations which actually would have resulted had the purchases beenin effect at the respective periods or of future results.

2. REVENUES


Analog (PSTN)/digital (ISDN and ADSL) 14,189 13,668 12,802

Mobile telephony 17,199 9,531 7,197

Leased lines 1,008 1,065 902

Satellite and TV-distribution 5,903 3,879 3,245

Other network based activities 2,784 2,633 2,215

Customer equipment 1,528 2,165 2,836

IT service and installations 4,626 5,009 4,738

Advertising, etc - 1,266 1,555

Other 1,431 1,388 1,040

Revenues 48,668 40,604 36,530

Gain on disposal of fixed assets and operations 158 5,436 1,042

Total revenues 48,826 46,040 37,572

Analog (PSTN)/digital (ISDN and ADSL) includes revenues from traffic, subscription and connection for analog (PSTN) and dig-ital (ISDN and ADSL). Further, it includes revenues from incoming traffic from other telephone operators.

Mobile telephony includes revenues from traffic, subscription and connection for mobile telephones, paging, incoming trafficfrom other mobile operators, text messages and content.

Leased lines include revenues from subscription and connection for digital and analog circuits.

Satellite includes revenues from satellite broadcasting, distribution of TV channels to the Nordic market, satellite-based net-work, and revenues from maritime satellite communication. TV-distribution includes revenues from subscription, connectionand distribution of TV channels through cable and satellite, and sale of program cards.

Other network-based activities include revenues from leased networks, data network services, Internet subscriptions, etc.

Customer equipment includes sale of customer equipment (telephone sets, mobile phones, computers, PABXs, etc.).

IT service and installations includes revenues from installations, sales and operation of IT-systems, together with consultancyservices and sale of software.

Advertising, etc. includes sale of advertising related to directory activities and sales of directories, etc, mainly through oursubsidiary Telenor Media, which we sold as of 1 October 2001.

Other includes revenues from contracting, rent etc.


3. BUSINESS AREAS

Mobile comprised the Group's mobile communication comprising voice, data, Internet, content services and electronic com-merce in the Norwegian and the international markets. Networks comprised the Group's fixed network in Norway and deliversservices including analog (PSTN), digital (ISDN) broadband and leased lines to residential and business customers and toother network operators, as well as ADSL to service providers. Plus comprised TV-based services mainly within the Nordicregion and provided Internet access, and services including ADSL to the residential market in Norway, as well as telephony andInternet services in Sweden until 31 December 2002. Business Solutions comprised a broad range of communication andapplication management solutions to the business market in Norway and selected European countries. EDB Business Partner isan Oslo Stock Exchange listed IT group, which delivers solutions, consulting services and operating services. Other Business

units comprised business units as Satellite Services, Satellite Networks, Teleservice, Venture and Itworks, which filed for bank-ruptcy in 2002. Corporate functions and Group activities comprised activities as Real Estate, Research and Development,strategic Group projects, Internal IT operations, Group Treasury, International services and central staff and support functions.Bravida delivers installation, maintenance and operating services to network operators and other customers. From 1 Novem-ber 2000 Bravida became an associated company of Telenor. Media delivered directory service in Norway and abroad.Telenor Media was sold with effect from 1 October 2001.

The business areas and the amount of each business areas item reported below for 2002, 2001 and 2000 are consistent withreporting to the chief operating decision-maker in these periods, considered changes in the structure of the business areas in2001, and were used by the chief operating decision-maker for assessing performance and allocating resources.

Telenor has implemented changes in the business area structure from 1 January 2003. For external reporting, Networks willconsist of the operations of Networks in the 2002 structure, as well as parts of the operations of Business Solutions, the IT-operations from Corporate functions and Group activities and the Internet part of Plus. The remaining Broadcasting part ofPlus will be reported as a separate business area. Nextra International and the software operations, both transferred fromBusiness Solutions will be reported under other business areas. Mobile remains unchanged.

Deliveries of network-based regulated services within the Group are priced based on cost prices in negotiations between theunits. For contract-based services, product development etc., prices are negotiated between the parties based on marketprices. All other deliveries between the business areas are to be based on market prices.

Gain and loss from Group internal transfer of business, Group contribution and dividends are not included in the profit and lossstatements for the business areas. Eliminations of profit and loss are primarily sales and purchases between the businessareas. Balance sheet eliminations are primarily Group internal receivables and payables.

Profit and loss 2002

Depreciation, Oper- Associated Profit (loss)

amortization ating Companies Net before taxes

External and write- profit and joint financial and minority

(in NOK millions) Revenues1)

revenues1)

EBITDA2)

downs (loss) ventures items interests

Mobile 20,346 19,079 7,482 6,068 1,414 (2,030) (2,050) (2,666)

Networks 16,488 13,761 5,717 3,191 2,526 - (329) 2,197

Plus 4,862 4,378 139 1,022 (883) (270) (815) (1,968)

Business Solutions 6,157 4,444 26 1,833 (1,807) 1 (54) (1,860)

EDB Business Partner 4,341 3,386 348 757 (409) (5) (86) (500)

Other business units 3,978 3,320 274 364 (90) (132) (866) (1,088)

Corporate functions

and Group activities 2,850 458 (477) 708 (1,185) (1) 1,929 743

Elimination (10,196) - (40) (154) 114 (13) (95) 6

Total 48,826 48,826 13,469 13,789 (320) (2,450) (2,366) (5,136)

1) Revenues include gains on disposal of fixed assets and operations.2) EBITDA is operating profit (loss) before depreciation, amortization and write-downs.


Balance and investments at 31 December 2002

Long-term

liabilities Short-

Fixed Associated Current Total incl. term Invest-

(in NOK millions) assets companies assets assets provisions liabilities ments

Mobile 36,644 8,532 8,833 54,009 36,846 23,377 12,625

Networks 12,824 - 4,318 17,142 7,564 7,479 1,853

Plus 7,465 711 3,971 12,147 11,803 2,887 2,925

Business Solutions 3,945 9 4,543 8,497 5,475 2,999 1,104

EDB Business Partner 2,433 17 1,495 3,945 921 1,358 255

Other business units 3,234 210 2,715 6,159 4,281 1,475 1,029

Corporate functions and Group activities 70,987 1 19,135 90,123 22,507 25,245 1,588

Elimination (72,859) 9 (29,714) (102,564) (58,943) (43,104) (79)

Total 64,673 9,489 15,296 89,458 30,454 21,716 21,300






revenues1)

EBITDA2)


Mobile 12,558 11,260 4,067 1,572 2,495 9,677 (496) 11,676

Networks 16,568 14,112 5,666 3,491 2,175 — (149) 2,026

Plus 3,386 2,954 248 1,089 (841) (547) (410) (1,798)

Business Solutions 5,940 4,616 (828) 2,140 (2,968) (874) (316) (4,158)

EDB Business Partner 4,811 3,353 447 1,655 (1,208) 130 (94) (1,172)

Media 1,343 1,263 313 51 262 (12) 21 271

Other business units 4,033 2,995 (37) 649 (686) (80) (402) (1,168)

Corporate functions and

Group activities 7,890 5,491 4,593 454 4,139 (30) 686 4,795

Elimination (10,489) (4) (219) (28) (191) (27) 1 (217)

Total 46,040 46,040 14,250 11,073 3,177 8,237 (1,159) 10,255


Balance and investments at 31 December 2001

Long-term

liabilities Short-

Fixed Associated Current Total incl. term Invest-

(in NOK millions) assets Companies assets assets provisions liabilities ments

Mobile 29,281 13,078 15,485 57,844 19,418 34,899 7,211

Networks 14,246 — 4,441 18,687 4,520 6,658 3,719

Plus 4,996 850 2,456 8,302 5,324 2,997 1,741

Business Solutions 4,257 7 4,572 8,836 2,052 8,723 1,572

EDB Business Partner 2,957 29 1,684 4,670 1,081 1,431 923

Media - - - - - - 183

Other business units 3,424 247 2,378 6,049 3,480 1,324 728

Corporate functions and group activities 40,545 - 20,772 61,317 13,118 30,997 2,769

Elimination (47,857) 35 (35,260) (83,082) (29,347) (69,735) -

Total 51,849 14,246 16,528 82,623 19,646 17,294 18,846







revenues1)

EBITDA2)


Mobile 9,799 8,267 2,720 1,126 1,594 (460) (821) 313

Networks 16,685 14,318 5,672 2,625 3,047 - (72) 2,975

Plus 2,875 2,500 611 476 135 20 (8) 147

Business Solution 4,316 3,358 (600) 573 (1,173) (69) (161) (1,403)

EDB Business Partner 3,966 2,461 554 353 201 (21) (19) 161

Media 1,655 1,557 359 58 301 6 33 340

Bravida 4,225 1,799 80 89 (9) - (11) (20)

Other business units 4,033 2,542 261 442 (181) (167) 142 (206)

Corporate functions and Group

activities 3,809 852 445 429 16 (1) (34) (19)

Elimination (13,791) (82) (539) (237) (302) - 17 (285)

Total 37,572 37,572 9,563 5,934 3,629 (692) (934) 2,003


Geographic distribution of revenues based on customer location1)


Norway 31,044 36,555 31,466

Other Nordic 3,298 2,235 2,018

Western Europe 1,588 2,061 1,579

Central Europe 5,348 800 841

Eastern Europe 1,619 828 160

Asia 4,409 2,346 594

Other countries 1,520 1,215 914

Total revenues 48,826 46,040 37,572

Geographic distribution of revenues based on company location1)


Norway 33,224 39,453 34,235

Other Nordic 2,492 878 641

Western Europe 1,580 2,144 1,246

Central Europe 4,966 505 337

Eastern Europe 1,427 705 286

Asia 4,295 2,088 537

Other countries 842 267 290

Total revenues 48,826 46,040 37,572

1) Revenues include gains on disposal of fixed assets and operations. Gain on disposal of foreign subsidiaries is recorded as relating to

the country in which the subsidiary was located.

Assets by geographical location of the company

Tangible assets Total assets

(in NOK millions) 2002 2001 2002 2001

Norway 28,102 30,004 33,290 31,788

Other Nordic 1,495 562 7,509 8,126

Western Europe 164 225 13,997 15,572

Central Europe 2,881 319 13,827 3,569

Eastern Europe 2,363 758 6,646 3,914

Asia 5,584 5,717 13,184 19,145

Other countries 413 23 1,005 509

Total assets 41,002 37,608 89,458 82,623


4. COST OF MATERIALS AND TRAFFIC CHARGES


Traffic charges — network capacity 6,463 4,853 3,688

Traffic charges — satellite capacity 1,527 1,190 805

Cost of materials etc 4,495 4,161 5,113

Total cost of materials and traffic charges 12,485 10,204 9,606

5. OWN WORK CAPITALIZED


Cost of materials etc 29 220 367

Salaries and personnel costs 303 396 667

Other operating expenses 235 386 510

Total own work capitalized 567 1,002 1,544

6. SALARIES AND PERSONNEL COSTS


Salaries and holiday pay 7,659 7,897 8,109

Social security tax 1,168 1,132 1,212

Pension costs including social security tax 789 591 538

Other personnel costs 488 508 654

Total salaries and personnel costs 10,104 10,128 10,513

The average number of employees was 23,000 in 2002, 22,400 in 2001 and 24,950 in 2000.

7. PENSION OBLIGATIONS

Telenor provides defined benefit pension plans for substantially all employees in Norway. In addition, the Norwegian govern-ment provides social security payments to all retired Norwegian citizens. Such payments are calculated by reference to a baseamount annually approved by the Norwegian parliament. Benefits are determined based on the employee's length of serviceand compensation. The cost of pension benefit plans is expensed over the period which the employee renders services andbecomes eligible to receive benefits.

13.298 of the Group's employees were covered through Telenor Pension Fund as of 31 December 2002. The Group has a fewgroup pension schemes with independent insurance companies and a separate pension plan for executive employees. Planassets consisting primarily of bonds and shares fund these pension plans. For employees outside of Norway, contribution plansare dominant.

In addition Telenor has two early retirement pensions plans. The agreement-based early retirement plan (AFP) was estab-lished in 1997. Under this scheme employees may retire upon reaching the age of 62 years or later. The other plan is an earlyretirement plan that was offered to the employees within established criteria until the end of 1996. Telenor ASA covers thecost of early retirement. The present value of the estimated pension obligation is included in the calculation of the pensionobligation presented below. This early retirement plan does not have any plan assets.

Actuarial gains and losses are mainly due to the reduction in discount rate, which was implemented as of 31 December 1999, aswell as lower actual return on plan assets than estimated, due to the reduction in share prices the latest years. In additionhigher salary increases and pensions adjustments than estimated have increased actuarial losses.

(in NOK millions) 2002 2001

Change in benefit obligation

Benefit obligation at the beginning of the year 3,335 2,945

Service cost 543 435

Interest cost 218 186

Actuarial gains and losses 40 106

Acquisitions and sale 5 (108)

Benefits paid (212) (229)

Benefit obligations at the end of the year 3,929 3,335



Change in plan assets

Fair value of plan assets at the beginning of the year 2,400 2,052

Actual return on plan assets (38) 7

Acquisitions and sale 8 (88)

Pension contribution 531 549

Benefits paid (142) (120)

Fair value of plan assets at the end of the year 2,759 2,400

Funded status 1,170 935

Unrecognized prior service costs (154) (233)

Unrecognized net actuarial losses (852) (644)

Prepaid social security tax 27 6

Total provision for pensions 191 64

Assumptions as of 31 December 2002 2001 2000

Discount rate in % 6.5 6.5 6.5

Expected return on plan assets in % 7.5 7.5 7.5

Rate of compensation increase in % 3.5 3.5 3.5

Expected increase in the social security base amount in % 3.0 3.0 3.0

Annual adjustments to pensions in % 3.0 3.0 3.0

Components of net periodic benefits cost 2002 2001 2000

Service cost 543 435 375

Interest cost 218 186 189

Expected return on plan assets (185) (164) (148)

Amortization of prior service costs 14 23 23

Amortization of actuarial gains and losses 57 16 25

Social security tax 90 68 59

Net periodic benefit costs 737 564 523

Contribution plan costs 52 27 15

Total pension costs charged to profit (loss) for the year 789 591 538

8. OTHER OPERATING EXPENSES


Cost of premises, vehicles, office equipment, etc 2,196 2,267 1,939

Operation and maintenance 3,418 2,673 954

Travel and travel allowances 560 750 772

Postage Freight, Distribution and Telecommunication 327 343 365

Concession fees 425 130 91

Marketing and sales commission 2,069 1,787 1,582

Advertising 916 598 596

Bad debt1) 337 362 191

Consultancy fees and external personnel2) 1,394 2,246 2,222

Workforce reductions, loss contracts and exit from activities1) 982 625 (10)

Other 564 616 674

Total other operating expenses 13,188 12,397 9,376

1) See note 9 and 1 1 respectively.2) Includes fees for consultants and external personnel, which perform services that are sold to external customers or capitalized on

fixed assets.


9. BAD DEBT


Provisions as of 1 January 543 462 538

Provisions as of 31 December 643 543 462

Change in provisions for bad debt 100 81 (76)

Other changes in provisions for bad debt1) (119) 60 6

Realized losses for the year 418 264 312

Recovered amounts previously written off (62) (43) (51)

Total bad debt 337 362 191

1) Includes effects of disposal and acquisition of businesses and translation adjustments.

10. RESEARCH AND DEVELOPMENT COSTS

Research and development costs amounted to NOK 531 million, NOK 916 million and NOK 524 million for 2002, 2001 and2000 respectively. Research and development activities relate to new technologies, new products, security in the network andnew usages of the existing network. It is expected that research and development costs will create future profitability.

11. WORKFORCE REDUCTIONS, LOSS CONTRACTS AND EXIT FROM ACTIVITIES

In 2002, 2001 and 2000, provisions were made for workforce reduction, loss contracts and exit from activities.

Loss contracts relate mainly to contractual obligations no longer of use in the ongoing business, loss on delivery contracts andloss on property leases.

The following tables displays roll forward of the accruals from 31 December, 1999:2000 2001

31.12.1999 2000 amounts 31.12. 2000 2001 amounts 31.12.2001

(in NOK millions) balance additions utilized balance additions utilized balance

Workforce reductions etc1) 74 9 25 58 667 209 489

1) Include expenses for workforce reductions, loss contracts and exit from activities.

2002 2002 2002

additions in additions 2002 amounts

31.12.2001 profit and directly in amounts taken to 31.12.2002

(in NOK millions) balance loss balance utilized income balance

Workforce reductions 112 713 22 183 1 663

Loss contracts and exit from activities 377 309 39 250 39 436

Total 489 1,022 61 433 40 1,099

Additions in profit and loss in 2002 are as follows: Mobile expensed NOK 117 million and Networks NOK 161 million for work-force reductions. EDB Business Partner expensed NOK 106 million for workforce reductions and NOK 5 million for exit fromactivities. Plus expensed NOK 55 million for workforce reductions and NOK 19 million for termination of property lease con-tracts. Business Solutions expensed NOK 58 million for workforce reductions and NOK 96 million for loss contracts and exitfrom activities. Other business units expensed NOK 79 million for workforce reductions, of which NOK 75 million related toclose down of departments in Teleservice. Corporate functions and Group activities expensed NOK 137 million for workforcereductions and NOK 190 million for loss on property lease contracts. Additions directly in the balance sheet related to UtforsAB, which was consolidated as of 31 December 2002, and was a consequence of events and decisions made in the companyprior to the time of consolidation. Amounts taken to income in 2002 related to TTYL and in Business Solutions International,where the outcomes of loss contracts and exit from activities were better than estimated.

Provisions for workforce reduction as of 31 December 2001 included more than 250 employees. Costs for workforce reductionsin 2002 included termination of employment of approximately 1,700 employees. The provision of workforce reduction as of 31December 2002 included approximately 1,600 employees.

The additions in 2001 are as follows: Plus expensed NOK 49 million for loss contracts and Business Solutions expensed NOK229 million for workforce reductions, loss contracts and exit from activities, mainly related to the Internet business. EDBBusiness Partner expensed NOK 170 million for workforce reductions, loss contracts and exit from activities, and additionallyrecorded NOK 42 million in the balance sheet in connection with the purchase price allocation in a business combination.Other business units and corporate functions expensed NOK 177 million in 2001, of which NOK 74 million related to transfer ofactivity in the Telemuseum to a foundation, NOK 42 million for restructuring and workforce reductions in Itworks and NOK47 million for exit from the activities in TTYL. Of the provision related to the dismantling of the NMT 900 mobile network as of31 December 2000, NOK 27 million was reversed in 2001 without incurring related expenses.


12. FINANCIAL INCOME AND EXPENSES


Dividends from satellite organizations - 97 196

Interest income 476 740 573

Other financial income 91 60 59

Total financial income 567 897 828

Interest expenses (1,901) (1,638) (1,965)

Other financial expenses (96) (53) (96)

Capitalized interest 164 295 140

Total financial expenses (1,833) (1,396) (1,921)

Net foreign currency gain (loss) (311) (402) (64)

Gain on sale of financial assets 59 491 376

Loss and write-downs of financial assets (848) (749) (153)

Net gain (loss) and write-downs of financial assets (789) (258) 223

Net financial items (2,366) (1,159) (934)

During 2002 and 2001, write-downs of NOK 817 and NOK 599 million respectively were made on shares and other financialassets, for diminution in values other than temporary. The write-downs were triggered by a fall in market values. Listed shareswere written down to the quoted market prices. For non-listed shares the values were based on individual estimates of the fairvalues. In 2002, the value of the capital contribution to Telenor Pension Fund was written down by NOK 78 million to the bookvalue of the equity in the fund as of 31 December 2002.

13. TAXES


Profit (loss) before taxes and minority interests

Norway (1,150) 2,683 3,300

Outside Norway1) (3,986) 7,572 (1,297)

Total profit (loss) before taxes and minority interests (5,136) 10,255 2,003

Current taxes

Norway 2,769 1,826 1,184

Outside Norway 1,478 1,758 12

Total current taxes 4,247 3,584 1,196

Deferred taxes

Norway (4,005) (555) 81

Outside Norway (722) 868 (416)

Total deferred taxes (4,727) 313 (335)

Total income tax expense (income) (480) 3,897 861

1) Includes associated companies and subsidiaries outside Norway. Gains and losses from disposal of companies are related to the

countries in which the disposed companies were located. The gains and losses are, however, to a large extent liable to tax in Norway,

except the sale of VIAG Interkom in 2001 .


Effective tax rate


Expected income taxes according to statutory tax rate (28%)1) (1,438) 2,871 561

Net losses from associated companies and subsidiaries outside Norway2) 1,012 1,778 674

Net non-deductible expenses and (non-taxable income) 85 (1,404) (79)

Amortization and write-downs of goodwill 850 399 100

Previous not recognized deferred tax assets (725) (205) (410)

Not recognized tax assets current year 73 470 -

Tax claim related to Sonofon 2,409 - -

Court case in Greece 414 - -

Liquidation of Telenor Digifone Holding AS (3,227) - -

Other 67 (12) 15

Income tax expense (income) (480)3)

3,897 861

Effective tax rate in % N/A3)

38.0 43.0

1) Norwegian nominal statutory tax rate is 28%. 2) Includes amortization and write-downs of Telenor's excess values in respect of associated companies.3) There was a loss before taxes and minority interests in 2002, and a tax income.

The tax income in 2002 was lower, and the tax expense for 2001 and 2000 was higher than the nominal statutory tax rateshould imply. This was due to valuation allowances, mainly on losses in associated companies and subsidiaries outside Nor-way, together with the amortization and write-downs of part of the net excess values (mainly goodwill). A large portion of theamortization and write-downs of goodwill in EDB Business Partner in 2002 and previous years have reduced taxes in 2002 andprevious years.

In 2002, Telenor realized tax losses on the simultaneous liquidation of Telenor Digifone Holding AS and Nye Telenor Communi-cations I AS. Telenor Digifone Holding AS was the company that realized the sale of shares in Esat Digifone in 2001. The tax-able loss was due to a high cost price for tax purposes for the shares owned by Telenor ASA. Furthermore, in 2002 Telenorsold, or entered agreements to sell, some companies on which valuation allowances had been recorded in previous years,mainly companies in Business Solutions International. These effects have been recorded in the reconciliation line item ” Previ-ous not recognized deferred tax assets”. In cases where subsidiaries still are consolidated valuation allowances in subsidiariesis listed in the note below and devaluated.

During the ordinary assessment for 2002, the tax assessment authorities in Norway notified Telenor Communication AS (nowTelenor Eiendom Holding AS) that its tax return for the financial year 2001 had not been accepted insofar as the loss derivingfrom the disposal of the shares in Sonofon Holding A/S was concerned. As a result of this tax claim, the current tax for 2001was increased by NOK 2.41 billion, which was expensed in 2002. Telenor recognized this tax loss upon the disposal of shares inSonofon Holding A/S to Dansk Mobil Holding AS, a sister company of Telenor Eiendom Holding AS. The disposal was carriedout as an integral part of the overall restructuring of our Group. Telenor has in January 2003 initiated proceedings against theNorwegian Tax Authorities. The change of our tax return has increased the RISK adjustment (adjustment of the taxable cost-price, that only affect Norwegian investors) for Telenor ASA as of 1 January 2002 by NOK 3.44 per share. Any subsequentreassessment as a result of a court ruling in favor of Telenor will decrease the RISK adjustment with effect from 1 January inthe year of reassessment.

In 2002 Telenor expensed NOK 0.4 billion related to a court ruling in Greece, where the disputed amount reduced taxespayable in 2000. Telenor will appeal the judgment.

In 2001, Telenor recorded deferred tax assets on some of the write-downs of goodwill in EDB Business Partner and on someother businesses outside Norway due to agreements to sell these activities. In addition, Sonofon was realized in 2001 for taxpurposes, and reduced our estimated current taxes by NOK 2.4 billion. As mentioned above, the tax authorities in 2002 chal-lenged the tax return for 2001. In 2001 Telenor recorded current taxes of NOK 4.6 billion on the gains on sale of VIAG Interkomand Esat Digifone, in addition to deferred taxes on these sales of NOK 1.5 billion. There was also a low taxable gain from thesale of Telenor Media due to a high cost price for tax purposes established in connection with the formation of the new holdingcompany Telenor ASA in 2000, where the new tax values established was based on estimated market values at that time.

In 2000 deferred tax assets related to the accumulated losses from VIAG Interkom and Esat Digifone were recorded as thesecompanies were sold in 2001. Furthermore, the gain on sale of Storm Communication Ltd was not taxable.

Tax losses carried forward is to a large extent related to subsidiaries outside Norway, but in 2002 Telenor realized a large taxloss to be carried forward, related mainly to the liquidation of Telenor Digifone Holding AS. Tax loss carried forward in Norwaywas NOK 11.8 billion as of 31 December 2002. Amounts carried forward expire as follows:


Tax losses carried forward

(in NOK millions)

2003 79

2004 33

2005 114

2006 989

2007 198

2007 and later 12,324

Not time-limited 3,656

Total tax losses carried forward 17,393

Deferred taxes

Assets Liabilities Assets Liabilities

(in NOK millions) 2002 2002 2001 2001

Tangible and intangible assets 2,669 (1,342) 1,716 (1,113)

Associated companies 3,368 (704) 1,819 (9)

Undistributed earnings from foreign subsidiaries - (76) - 923

Other long-term items 534 (868) 210 (170)

Total long-term assets and liabilities 6,571 (2,990) 3,745 (2,215)

Current assets 195 (51) 290 (136)

Current liabilities 508 (147) 315 (86)

Total current assets and liabilities 703 (198) 605 (222)

Tax losses carried forward 4,943 - 1,380 -

Deferred taxes 12,217 (3,188) 5,730 (2,437)

Valuation allowances (4,679) (3,188)

Net deferred taxes 4,350 105

Of which deferred tax assets (note 14) 4,866 600

Of which deferred tax liabilities (note 19) (516) (495)

Deferred taxes have not been recognized on undistributed earnings from domestic entities, which can be remitted tax-free asdividends or undistributed earnings from investments in foreign subsidiaries that are considered essentially permanent innature.

Preliminary RISK regulation (regulation of the taxable cost price) per share for Telenor ASA for 2002 is calculated to benegative by NOK 0.56 per share.

14. INTANGIBLE ASSETS

Acc.

Amort. amort.

Foreign and and

Accumul. exchange write- write- Book Book

cost Additions adjustm. Disposals downs downs value value

(in NOK millions) 01.01.02 2002 2002 2002 2002 31.12.02 31.12.02 31.12.01

Goodwill 10,970 7,456 (1,039) (305) (3,634) (6,982) 10,100 7,439

Other intangible assets

Customer Base 420 2,383 (57) (17) (448) (492) 2,237 383

Licenses 1,581 306 (46) (74) (492) (737) 1,030 1,339

Trademarks 167 446 (35) - (43) (48) 530 162

Other 512 1,219 (12) (153) (375) (418) 1,148 277

Total other intangible assets 2,680 4,354 (150) (244) (1,358) (1,695) 4,945 2,161

Total 13,650 11,810 (1,189) (549) (4,992) (8,677) 15,045 9,600

Deferred tax assets - - - - - - 4,866 600

Total intangible assets 13,650 11,810 (1,189) (549) (4,992) (8,677) 19,911 10,200

The additions of other intangible assets in 2002 are mainly related to Pannon GSM, Kyivstar and Canal Digital.


Specification of amortization and write-downs:

(in NOK millions) Goodwill Other intangible assets

2002 2001 2000 2002 2001 2000

Amortization 1,002 668 496 962 317 124

Write-downs 2,632 2,266 - 396 126 13

Total 3,634 2,934 496 1,358 443 137

Changes in the carrying value of goodwill for the year ended 31 December 2002:

Business EDB Business Other

(in NOK millions) Mobile Plus Solutions Partner units Total

Balance as of 1 January 2002 3,849 512 739 1,979 360 7,439

Goodwill acquired during the year 5,749 1,999 (307)1) 83 (68) 7,456

Translation adjustments (840) (12) (146) (27) (14) (1,039)

Amortization (509) (135) (150) (166) (42) (1,002)

Write-downs (impairment losses) (2,138) - (162) (356) 24 (2,632)

Goodwill written off related to sale

of business units - (48) - (15) (59) (122)

Balance as of 31 December 2002 6,111 2,316 (26) 1,498 201 10,100

1) Includes negative goodwill related to Utfors AB, see the table below.

The write-down of goodwill in Mobile was related to DiGi.Com as a result of continued low publicly quoted share prices. Thewrite-down was based on the publicly quoted share price at 31 December 2002, adjusted to reflect a control premium. Thewrite-downs of goodwill in EDB Business Partner were based on a review of all individual goodwill items based on discountedfuture cash flows. The write-down in Business Solutions was partly related to Nextra International based on evaluation of theprofitability in each company.

Goodwill relates to the following subsidiaries and operations:

(in NOK millions) Book value 31.12.02 Amortization period Year of acquistion

Pannon GSM 5,124 10–20 years 2002

Canal Digital Group 1,929 10–15 years 2002

Kyivstar 325 12–20 years 2002

Utfors AB1) (351) 18 years 2002

DiGi.Com bhd 641 15–20 years 2001

Sweden On Line AB 109 10 years 2001

Unigrid AB 105 10 years 2001

Marlink (former SAIT Communications S.A) 60 10 years 2001

DnB IT Operations 334 7 years 2001

Fellesdata AS 915 20 years 2000

OJSC Comincom/Combellga 306 10 years 2000

Telenor Avidi AS (alfaNETT) 189 10 years 2000

Others 414 3–20 years

Total 10,100

1 ) The allocation between goodwill and other net excess values and amortization periods are preliminary estimates.


15. TANGIBLE ASSETS

Depre- Acc.

ciation depr.

and and

Accumul Translation write- write- Book Book

cost Additions adjustm. Disposals downs downs value value

(in NOK millions) 01.01.02 2002 2002 2002 2002 31.12.02 31.12.02 31.12.01

Local, regional & trunk networks 34,968 3,094 (256) (17) (2,005) (26,940) 10,849 10,000

Mobile telephone network and switches 11,632 5,452 (838) (12) (1,753) (6,609) 9,625 6,759

Subscriber equipment 315 28 (8) (9) (33) (244) 82 104

Switches & equipment 15,073 589 (63) (1,168) (1,166) (11,096) 3,335 3,993

Radio installations 1,669 17 (7) (1) (15) (644) 1,034 1,040

Cable TV equipment 1,695 99 (2) (50) (192) (746) 996 1,140

Land 710 143 (17) (7) (2) (7) 822 704

Buildings 7,750 2,804 (11) (274) (368) (3,852) 6,417 4,182

Support systems 8,696 4,326 (105) (1,501) (3,140) (7,101) 4,315 3,696

Satellites 2,176 14 (3) (1) (123) (1,397) 789 901

Total1)

84,684 16,566 (1,310) (3,040) (8,797) (58,636) 38,264 32,519

Work in progress2) 5,089 (2,207) (144) - - - 2,738 5,089

Total 89,773 14,359 (1,454) (3,040) (8,797) (58,636) 41,002 37,608

1) Includes book value of NOK 1 ,870 million for capital leases as of 31 December 2002, mainly switches, GSM Mobile telephone network

and satellites.2) Net additions.

Accumulated capitalized interest (cost) was NOK 1.116 million as of 31 December 2002.

Specification of amortization and write-downs:

(in NOK millions) Tangible assets

2002 2001 2000

Depreciation 8,272 6,266 5,201


Total 8,797 7,696 5,301

In 2002, write-downs of NOK 276 million were recorded in Business Solutions on operating platforms and equipment, bothused in the internal operations and used in operating contracts. Equipment related to operating contracts were evaluatedbased on expected cash flows from the operating contracts including terminal value at the end of the contract period. Internaloperating platforms and equipment were written down when they no longer were in use. Similar evaluations were made inTelenor’s internal IT-environment in Corporate functions and Group activities, resulting in write-downs of NOK 42 million in2002. In Mobile, write-downs of NOK 133 million were made, to a large extent on equipment no longer in use in the IT-systemportfolio in Mobile in Norway. In Plus, write-downs of NOK 52 million were made, primarily related to equipment for TV-distri-bution due to the low demand in the SMATV market in Denmark and Sweden.

The Group has entered into Cross Border Tax Benefit Leases for digital telephony switches and for GSM Mobile network with abook value as of 31 December 2002 of NOK 699 million. The agreements called for the prepayments of all amounts due byboth parties under the leases to financial institutions. The financial institutions then release the payments over the life of theleases in accordance with their contractual terms. During the course of the lease, Telenor maintains the rights and benefits ofownership of the equipment. Telenor has received benefits of NOK 320 million since the parties can depreciate the equipmentfor tax purposes. The amount has been deferred over the expected lease periods.

16. FINANCIAL ASSETS


Long-term receivables*) 1,299 965

Shares and other investments**) 2,461 3,076

Associated companies and joint ventures***) 9.489 14,246

Total financial assets 13,249 18,287


*) Long term receivables


Interest bearing

Receivables on associated companies and joint ventures1) 1,169 783

Loans to employees 31 27

Other long-term receivables 63 49

Provision for bad debt (4) -

Non-interest bearing

Receivables on associated companies and joint ventures 4 21

Other long-term receivables 36 95

Provision for bad debt - (10)

Total long-term receivables 1,299 965

1) In 2002, interest bearing receivables on associated companies and joint ventures related mainly to Bravida and Sonofon.

**) Shares and other investments:

Specification of other shares and investments in 2002: (in NOK thousands) No. of shares owned by Telenor Share owned in % Book value

Inmarsat Ventures Plc 15,000,000 15.0 1,435,000

Intelsat Ltd. 6,855,530 4.1 441,544

New Skies Satellites N.V. 4,709,400 3.7 130,901

Expert ASA 3,190,000 10.0 116,435

Eutelsat S.A. 4,127,130 0.4 35,458

Cosmo Holding Albania Societet Anonyme 48,000 3.0 23,283

Carrot Communication AS 1,162,791 5.3 10,000

GolfaXess ASA 486,500 12.0 6,405

Energivekst AS 45,000 4.3 4,750

RKS AB 194,401 2.0 3,840

Bank VPB 7,600 19.0 3,086

Bank Rosprombank 10,000 2.0 2,877

Norsk Helse Informatikk AS 140,000 17.3 2,300

Extend AS 319,400 42.6 2,000

Industream AS 488,047 12.4 1,906

IT Fornebu AS 76,200 16.3 1,657

Sørlandske Teknologisenter AS 1,300 18.0 1,300

Smart Club ASA 2,500,000 2.1 1,200

TÆL AS 1,000 10.8 1,030

Sponsor Service ASA 900,000 11.7 -

Capital contribution to Telenor Pensjonskasse 219,755

Other 16,084

Total other shares and investments 2,460,811

New Skies Satellites N.V., Expert ASA and RKS AB are listed companies. The market values as of 31 December 2002 forTelenor's shares were NOK 131 million, NOK 105 million and NOK 1 million respectively. Other includes shares in companieswhere Telenor owns more than 10% with insignificant book values.

***) Associated companies and joint ventures


Balance 1 January 14,186 39,088

Investments 883 2,319

Transferred to/from other investments and disposal (1,420) (34,626)

Net income 341 (318)

Gains (losses) on disposal1) 36 21,579

Amortization of net excess values (862) (1,427)

Write-downs of net excess values (1,965) (11,597)

Equity and translations adjustments (1,760) (832)

Balance 31 December 9,439 14,186

Of which investments carried with a negative value (classified as provisions) 50 60

Total associated companies and joint ventures 9,489 14,246


Associated companies and joint ventures are carried at negative values where Telenor has a corresponding liability above andbeyond the capital contributed.

1) Specification of gains and losses on disposal:(in NOK millions) 2002 2001

VIAG Interkom - 10,705

Esat Digifone - 10,740

Ephorma AS - 100

European Medical Solutions Group AS - 41

Extel 40 -

Other (4) (7)

Total 36 21,579

Specifications of investments in associated companies and joint ventures:

Invest- Amortization Equity

ments/ and write- and trans- Net

Share Book disposals Share downs of lation Book excess

(in NOK thousands) owned value during of net net excess adjust- value values

Company in % 31.12.01 2002 income1)2)6)

values6)

ments 31.12.02 31.12.02

Sonofon Holding A/S 3) 6) 53.5 5,555,930 - 139,177 (1,489,189) (458,627) 3,747,290 3,828,304,

VimpelCom 8) 13) 29.0 1,806,770 - 313,714 (41,673) (445,365) 1,633,447 209,232

VimpelCom-Region 9) 17.5 - 432,442 (41,368) 391,074 -

COSMOTE S.A.12) 13) 18.0 803,179 (2,115) 358,115 (4,959) (143,371) 1,010,847 94,892

DTAC 6) 10) 13) 40.3 1,849,365 - 34,862 (950,172) (380,058) 553,998 338,052

UCOM 6) 13) 24.9 385,761 - (709) (89,432) (76,621) 218,999 255,007

Connect Austria GmbH & Co 12) 17.5 821,910 - (6,636) - (70,145) 745,128 -

European Telecom S.A (ProMonte) 5) 44.1 144,831 406 57,520 - (31,008) 171,749 -

StavTeleSot J.S.C 11) 49.0 (894) - 38,336 - (5,346) 32,095 -

OniWay6) 20.0 267,423 217,231 (459,984) - (24,670) - -

Kyivstar G.S.M. JSC - 554,131 (645,796) 171,994 (31,672) (48,657) - -

Extel Kaliningrad J.S.C. 11) - (7,017) (44,376) 36,509 (712) (4,404) - -

Pannon GSM 7) - 729,137 (740,284) 14,934 (3,787) - - -

ZebSign 50.0 26,900 - (7,392) - - 19,509 -

Wireless Matrix Corporation 25.3 173,188 - (64,835) (66,283) (20,682) 21,388 67,030

Nordialog Oslo AS 48.0 8,427 - 1,693 - - 10,120 -

Triggerduck 33.5 7,777 - (445) (4,122) - 3,210 1,050

Oslo Lufthavn Tele & Data 50.0 6,779 - 2,475 - - 9,254 -

Glocalnet AB 13) 37.2 - 104,064 - - - 104,064 50,284

Canal Digital Group 4) - 144,721 7,734 (143,778) (8,677) - - -

A-pressen ASA 13) 29.1 497,844 - 16,591 (30,828) - 483,607 238,950

Otrum Electronics ASA 13) 33.1 184,481 - (4,836) (83,831) - 95,814 -

BitCom AB 49.0 4,322 3,974 395 (335) 306 8,051 2,781

AXON AS - 7,733 (6,700) (557) (476) - - -

TIBE Reklame Holding AS 34.0 12,346 - - (2,856) - 9,490 7,120

Logan-Orviss Int Inc. 44.0 8,793 - (908) (306) - 7,579 322

World Wide Mobile Communications AS 40.0 61,474 - 6,318 - (25,102) 42,690 -

Bravida ASA 46.4 135,693 90,825 (76,711) - - 149,808 -

TeleVenture Management AS 23.9 12,638 - 884 - (2,016) 11,505 -

Doorstep AS 50.0 7,537 - (2,395) - - 5,143 -

TN Renhold & Kantine AS 50.0 538 - 2,650 - - 3,188 -

Ajourit AS - 9,423 19,236 (28,659) - - - -

Other - (34,753) 25,987 (41,339) (18,148) 18,206 (50,047) 5,990

Total 14,186,387 (537,373) 376,983 (2,827,457) (1,759,541) 9,438,999 5,099,014

1) Includes pretax gains on disposal and Telenor's share of the companies' net income after taxes.2) Share of net income after taxes are partly based on preliminary results for some of the companies. Actual figures may deviate from

the preliminary figures.3) Jointly controlled according to a shareholders agreement. 4) With effect from 30 June 2002, the Canal Digital Group was consolidated as a wholly-owned subsidiary of Telenor.5) European Telecom S.A. has an ownership share of 91 .1 % in ProMonte GSM and Telenor owns 44% of European Telecom.6) In 2002 the following significant write-downs were recorded; Sonofon NOK 1 ,000 million, DTAC NOK 829 million, UCOM NOK 52 million.

Furthermore, the engagement in OniWay was written down by NOK 31 6 million to zero based on an evaluation of the values in the com-


pany and Telenor has no longer significant influence in the company. The write-downs were triggered by a significant fall in the market

values for telecommunication companies. For DTAC and UCOM the write-downs were made to the quoted market price as of 31 Decem-

ber 2002. The fair value for Sonofon was estimated based on estimates of future cash flows and comparison to similar companies. 7) On 4 February 2002 Pannon GSM became a wholly-owned subsidiary of Telenor.8) Telenor had a voting interest of 25% plus 1 3 shares in VimpelCom as of 31 December 2002. 9) In addition to Telenor’s direct ownership of 1 7.5%, VimpelCom has an ownership interest in VimpelCom-Region of approximately 65%. 1 0) The ownership interest in DTAC includes the direct ownership interest of 29.9% and Telenor’s indirect ownership through Telenor’s

24.9% ownership share in UCOM. 11) Telenor's ownership interests in Extel was sold in December 2002, and StavTeleSot was sold in January 2003 to VimpelCom-Region.1 2) Accounted for as associated companies due to significant influence in the companies based on shareholders’ agreements and repre-

sentation in the Boards of Directors.13) Market values as of 31 December 2002 for listed associated companies: VimpelCom: NOK 3,475 million, Cosmote: NOK 4,063 million,

DTAC: NOK 554 million, UCOM: NOK 21 9 million, A-pressen ASA: NOK 298 million, Otrum Electronics ASA: NOK 44 million, Glocalnet

AB: NOK 1 31 million.1 4) Net excess values at the date of acquisition are the differences between Telenor’s acquisition cost and Telenor’s share of equity of the

associated companies.

17. CURRENT RECEIVABLES


Accounts receivables

Accounts receivables 6,481 6,579

Provision for bad debt (585) (501)

Total accounts receivables 5,896 6,078

Other current receivables

Interest-bearing

Receivables from associated companies and joint ventures 16 170

Receivables on employees 3 -

Receivables from others 17 115

Non-interest-bearing

Receivables from associated companies and joint ventures 182 85

Receivable on employees 27 36

Other short-term receivables 330 1,300

Provision for bad debt (54) (32)

Total other current receivables 521 1,674

Prepaid expenses and accrued revenues

Prepaid expenses 772 539

Accrued revenues 1,679 1,410

Total prepaid expenses and accrued revenues 2,451 1,949

Total current receivables, etc 8,868 9,701

Due to the large volume and diversity of the Group's customer base, concentrations of credit risk with respect to tradeaccounts receivables are limited.

18. SHORT TERM INVESTMENTS


Bonds/Commercial paper 260 159

Shares1) 272 316

Total short term investments 532 475


1) Specification of shares classified as current assets as of 31 December 2002.

No. of shares Share Book

(in NOK thousands) owned by Telenor owned in % value

Incatel AS 144,082 77.5 54,769

Telenostra AS 91,157 35.5 34,721

Blue Chip Communication AS 3,926,466 53.6 25,718

Data Respons ASA 2,000,000 7.5 16,679

North Node AB 586,984 44.7 16,168

Locus Holding ASA 15,212,119 60.4 13,246

Viva Technologies AS 33,266,009 25.2 12,367

Q-Free ASA 2,500,850 5.5 11,890

Virtual Garden AS 2,009,820 16.9 10,535

Maritech AS 4,652,481 9.4 8,625

Nordisk Språkteknologi AS 3,221,793 25.8 7,650

Roxen AB 2,224,420 22.6 6,649

Voice Provider AB 45,217 25.9 5,972

Sonat AB 52,063 27.6 5,682

Travel Intelligence Group AS 3,933,270 43.6 5,033

Melody Interactive Solutions AB 283,408 4.1 3,854

Seven Mountains Solutions AS 37,500 12.7 3,000

Trøndelag Vekst AS 19,355 2.9 3,000

MRT Micro ASA 723,511,597 50.9 2,275

Proseq AS 240,333 70.0 2,000

Direct Distribution Center AB 15,000 93.8 1,205

Crest Computer Sweden AB 8,624,486 93.0 1,085

Other shares etc.1) 19,727

Total shares classified as current assets 271,850

1) Includes companies where Telenor owns more than 1 0% with insignificant book values.

The above shares are mainly owned by Telenor Venture AS and Telenor Venture II ASA. Q-Free ASA and Data Respons ASA arelisted companies. The market value as of 31 December 2002 for Telenor's shareholdings was NOK 12 million and NOK 10 millionrespectively. Mutual funds are included in other shares with a market value of NOK 16 million as of 31 December 2002.

19. PROVISIONS


Provisions for pensions 191 64

Deferred tax liabilities 516 495

Workforce reductions etc.1) 264 85

Negative values associated companies 50 60

Other provisions 155 57

Total provisions 1,176 761

1) Provisions for workforce reduction, loss contracts, exit from activities and legal disputes.


20. INTEREST-BEARING LIABILITIES

(in NOK millions) Limit 2002 2001

Euro Commercial paper program (ECP) USD 500 - -

U.S. Commercial paper program (USCP) USD 1,000 - -

Norwegian Commercial paper - 1,105 1,930

EMTN program USD 6,000 17,563 10,891

Japanese Private Placements - - 412

Norwegian Bonds - 3,142 700

Capital discount related to bonds - (40) (30)

Derivatives related to long-term interest-bearing liabilities1) - (300) (722)

Revolving credit facility USD USD 1,000 - -

Revolving credit facility EUR EUR 1,000 - -

Total long-term interest-bearing liabilities Telenor ASA 21,470 13,181

Long-term interest-bearing liabilities subsidiaries2)

7,335 5,316

Total long-term interest-bearing liabilities Telenor Group 28,805 18,497

Short-term interest-bearing liabilities subsidiaries 3,591 672

Total interest-bearing liabilities Telenor Group 32,396 19,169

1) Foreign currency derivatives used to convert the cash flows of a debt instrument into another currency. 2) Specified below.

Long-term interest-bearing liabilities Telenor ASA

The USD revolving credit facility matures in 2005. The EUR revolving credit facility matures in November 2003, but Telenorhas a one year term-out option for the outstanding amount as of November 2003. The EUR-facility includes a financialcovenant in the term-out period. If Telenor’s rating falls to BBB or Baa2, the relationship between net debt and EBITDA mustbe equal to or lower than 3.5:1.

According to Telenor’s Finance Policy, these committed credit facilities should at any time serve as refinancing source for alloutstanding commercial paper. Commercial paper is classified as long-term, irrespective of the actual maturity date.

The majority of commercial paper (ECP, USCP and Norwegian), Euro Medium Term Notes and Norwegian bonds were originallyissued by Telenor Communication AS (now Telenor Eiendom Holding AS). In relation to the reorganization of the Telenor Groupthe borrowings were transferred to Telenor ASA with consent from the creditors as of 15 April 2002. All borrowings in TelenorASA are unsecured. The financing agreements except commercial paper, contain provisions restricting the pledge of assets tosecure future borrowings without granting a similar secured status to the existing lenders (negative pledge) and also containcovenants limiting disposals of significant subsidiaries and assets.

The table below shows the debt instruments issued by Telenor ASA. Hedging instruments related to these borrowings are notincluded in the table.

Average interest Amount in Amount in Amount in

(in millions) rate 31.12.02 currency 31.12.02 NOK 31.12.02 NOK 31.12.01

Norwegian commercial paper

NOK 7.01% 1,105 1,105 1,930

EMTN programme

AUD 4.45% 37 146 170

CHF 3.21% 798 4,002 4,292

EUR 5.69% 1,235 9,001 1,460

JPY 2.26% 31,000 1,818 1,785

SEK 4.60% 150 119 -

USD 5.50% 350 2,437 3,154

Norwegian bonds

NOK 7.73% 3,142 3,142 700

Japanese Private Placements

JPY - - - 412

Total Telenor ASA 21,770 13,903


The table below includes debt instruments, cross currency swaps and interest rate swaps. When the currency- or interest rateexposure of the underlying borrowings has been altered through the use of derivatives, this is reflected in the figures in the table.

Average interest Amount in Amount in Amount in

(in millions) rate 31.12.02 currency 31.12.02 NOK 31.12.02 NOK 31.12.01

Norwegian commercial paper

NOK 7.01% 1,105 1,105 1,930

EMTN programme

CZK 4.17% 461 107 -

EUR 4.01% 848 6,183 5,093

GBP 5.38% 13 146 -

NOK 7.69% 6,497 6,498 2,469

SEK 4.74% 1,187 944 658

USD 2.44% 491 3,422 1,932

Domestic bonds

EUR 3.86% 135 981 699

GBP 4.86% 20 224 -

NOK 7.74% 1,860 1,860 -

Japanese Private Placements

NOK - - - 400

Total Telenor ASA 21,470 13,181

Long-term interest-bearing liabilities in subsidiaries

(in NOK millions) Average interest

Company Debt instrument Currency rate 31.12.02 31.12.02 31.12.01

DiGi.Com Borrowings from financial institutions USD 3.08% 226 410

DiGi.Com Borrowings from financial institutions MYR 7.66% 1,191 1,197

GrameenPhone Borrowings from financial institutions USD 6.90% 262 429

GrameenPhone Borrowings from financial institutions NOK 4.76% 75 75

Kyivstar Vendor financing USD 7,30% 113 -

Kyivstar Bonds USD 12.75% 696 -

Pannon Bonds HUF 13.78% 1,040 -

EDB Business Partner Borrowings from financial institutions NOK 7.50% 500 719

EDB Business Partner Borrowings from financial institutions SEK 4.00% 147 201

EDB Business Partner Finance lease NOK 8,03% 64 -

Business Solutions Finance lease NOK 7.00% 200 -

Business Solutions Vendor financing – SW licenses NOK 8.00% 656 879

Satellite Services AS Finance lease1) NOK 7.25% 1,114 1,228

Canal Digital Finance lease2) 550 -

Telenor Eiendom Holding AS Norwegian Commercial Paper NOK 7.01% 435 -

Miscellaneous 66 178

Total long-term interest bearing liabilities in subsidiaries 7,335 5,316

1) Satellite leases (Thor II and III). This financing is guaranteed by Telenor ASA2) This financing is guaranteed by Telenor ASA. Denominated in DKK, EUR, NOK, SEK and USD.

The interest bearing liabilities in subsidiaries are generally not guaranteed by Telenor ASA and are subject to standard finan-cial covenants. The covenant required a minimum interest coverage. The lender had at 31 December 2002 vaiwed this breach,which does not trigger cross default according to Telenor ASA’s loan agreements.

Telenor entered into Cross Border Tax Benefit Leases for digital telephony switches and for GSM Mobile telephone network in1998 and 1999. Telenor has prepaid all amounts due to financial institutions under these agreements. The leasing obligationsand the prepayments are netted in the balance sheet, and are not reflected in the tables. See note 15 and 31.


Short-term interest-bearing liabilities in subsidiaries

Average interest

(in NOK millions) rate 31.12.02 31.12.02 31.12.01

Telenor Eiendom Holding AS Provision tax claim 12.00% 2,409 -

Telenor Mobile Communication AS Provision court case 12.00% 530 -

DiGi.com Vendor financing and term loans 8.00% 362 -

Kyivstar Bonds and vendor financing 8.44% 144 -

Miscellaneous 146 672

Total short-term interest-bearing liabilities 3,591 672

At the end of 2002 Telenor increased short-term interest-bearing liabilities by NOK 2.4 billion related to a tax claim regardingthe sale of Sonofon Holding A/S and NOK 0.5 billion related to the court case in Greece.

Telenor has provided a guarantee for the tax claim of NOK 2.4 billion. As a result of Telenor’s decision to expense the tax claimat the end of 2002, 12% interest in arrears on the tax claim is expensed as long as the guarantee is provided. The Tax Authoritycan initiate collection of the claim if Telenor ASAs credit worthiness becomes materially weaker.

Maturity profile of interest-bearing liabilities as of 31 December, 2002

Total as of After

(in NOK millions) 31.12.02 2003 2004 2005 2006 2007 2008 2009 2010 2010

Norwegian commercial paper 1,105 1,105 - - - - - - - -

EMTN program 17,300 1,688 1,099 1,320 3,131 2,917 1,003 2,220 - 3,922

Domestic bonds 3,065 - - 1,006 - 1,861 - - - 198

Telenor ASA, total 21,470 2,793 1,099 2,326 3,131 4,778 1,003 2,220 - 4,120

Subsidiaries, short-term 3,591 3,591 - - - - - - - -

Subsidiaries, long-term 7,335 889 1,986 2,238 844 725 294 231 128 -

Subsidiaries, total 10,926 4,480 1,986 2,238 844 725 294 231 128 -

Telenor Group 32,396 7,273 3,085 4,564 3,975 5,503 1,297 2,451 128 4,120

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Telenor’s group treasury function (Telenor Finans) is responsible for funding, foreign exchange risk, interest rate risk and creditrisk management for the parent company and for companies owned more than 90%. Subsidiaries owned less than 90% nor-mally have standalone financing.

Telenor has limited activity related to interest rate and currency trading. As of 31 December 2002 Telenor did not have anyoutstanding open trading positions.

Interest rate risk

Telenor is exposed to interest rate risk through funding and cash management activities. Changes in market interest ratesaffects the fair value of assets and liabilities. Interest income and interest expense in the profit and loss statement, as well asinterest payments, are influenced by interest rate changes.

The objective for interest rate risk management is to minimize interest cost and at the same time hold the volatility of futureinterest payments within acceptable limits. To achieve this Telenor use a simulation model that takes into account marketvariables and the portfolio composition. The duration band of the portfolio is 0.5 - 2.5 years.

Telenor applies interest rate derivatives to manage the interest rate risk of the debt portfolio. This typically involves interestrate swaps, whereas forward rate agreements and interest rate options are used in certain situations.

Below is a sensitivity analysis that shows the change in fair value due to a one percentage point increase in interest rates. Thematrix is divided into time intervals. The interest rate risk is allocated to the next rate fixing date for floating rate instruments,and to the maturity date for fixed rate instruments. Consequently, the matrix shows the interest rate risk distribution of theportfolio.

The table below includes cash, short-term interest bearing investments, interest rate derivatives, currency derivatives andinterest bearing liabilities.


(in NOK millions equivalent as of 31 December 2002 Decrease in fair value due to 1% increase in interest rates

Average Average

Value years to duration 0–1 1–2 3–4 4–5 6–7 7–8 8–9 Beyond

Currency face maturity in years years years years years years years years 9 years

CZK 250 3.44 0.45 0.48 - - - - - - -

DKK 65 4.48 1.66 - - - - 1.06 - - -

EUR 7,241 3.71 1.27 10.85 (6.98) 24.11 33.71 21.32 - - -

GBP 425 5.56 0.35 1.34 - - - - - - -

HUF 1,409 1.58 1.38 - 25.64 - - - - - -

MYR 1,543 4.97 0.72 7.88 - - - - - 3,07 -

NOK 9,124 5.66 2.32 24.30 10.28 32.27 11.81 75.68 8.93 24.68 100.84

SEK 1,441 3.46 1.48 2.79 - 4.13 - 5.38 - 8.45 -

USD 5,374 4.04 1.00 18.44 - 18.82 1.73 13.06 - - -

Net interest bearing

liabilities 26,872 4.47 1.67 66.08 28.94 79.33 47.25 116.50 8.93 36.20 100.84

Exchange rate risk

Telenor is exposed to changes in the value of the Norwegian kroner relative to other currencies. Telenor has invested in com-panies that have other functional currencies than Norwegian kroner. In addition, companies that mainly operate in Norwegiankroner will have transactions denominated in currencies other than Norwegian kroner.

The book value of Telenor’s net investments in foreign entities varies with changes in the value of Norwegian kroner comparedto other currencies. The net income of the Group is also affected by changes in exchange rates, as the profit and loss contribu-tions of foreign entities are translated to Norwegian kroner using the average exchange rate for the period. If these companiespay dividends, it will typically be done in their local currency. Management’s strategy to handle exchange rate exposures relat-ed to net investments is to issue financial instruments in the currencies involved. Combinations of money market instruments(commercial paper and bonds) and derivatives (foreign currency forward contracts and currency swaps) are typically used forthis purpose.

Norwegian entities will also be exposed to exchange rate risk rising from revenues or operating expenses in foreign currencies.This exchange rate risk is normally not hedged by Telenor.

Exchange rate risk also arises when Norwegian entities enter into other transactions denominated in foreign currency, or whenagreements are made to acquire or dispose of investments outside Norway. Committed cash flows equivalent to NOK 50 mil-lion or higher are hedged economically using options or forward contracts. Hedge accounting is often not permitted for thesekinds of hedging relationships, which leads to gains and losses on the transactions being charged directly to profit and loss.Exchange rate risk related to debt instruments in foreign entities is also a part of the risk exposure of the Telenor Group.

Hedging as described above is only carried out in currencies that have well-functioning capital markets.

The table below shows the currency distribution of the Group’s interest bearing liabilities and derivatives in other currenciesthan Norwegian kroner as of 31 December, 2002:

Face value in millions,

local currency AUD CHF CZK DKK EUR GBP HUF JPY MYR SEK USD

Interest bearing liabilities (37) (798) - (66) (1,370) (99) - (31,000) (853) (745) (570)

Currency swaps 37 798 (461) - 376 66 (31,000) 31,000 - (1,037) (141)

Forward contracts - - (620) - - (5) (10,000) - - (30) (60)

Total - - (1,081) (66) (994) (38) (41,000) - (853) (1,812) (771)


Credit risk

Credit risk is the loss which the Group would suffer if a counterpart failed to perform its financial obligations.

There is limited credit risk related to the account receivables due to the high number of customers.

Telenor has entered into Cross Border Tax Benefit Leases for digital telephony switches and for GSM Mobile network. Theagreements called for prepayments of all amounts due by Telenor. Prepayments as of 31 December 2002 of NOK 3.5 billion isdeposited in creditworthy financial institutions. The amount is not included in the balance sheet, see note 20.

Telenor invests surplus liquidity in short-term interest bearing assets. Credit risk is inherent in such instruments. Financial deriv-atives with positive replacement value for Telenor, taking into account legal netting agreements, also represent credit risk.

Credit risk arising from financial transactions is reduced through diversification, through accepting counterparts with highcredit ratings only and through setting strict limits on aggregated credit exposure towards each counterpart. Telenor ASA haslegal netting agreements (ISDA agreements), which allows gains to be offset against losses in a default situation with 15 of the16 banks that are counterparts in derivative transactions. As of 31 December 2002 Telenor ASA has collateral agreements withtwo banks that frequently are counterparts in derivative transactions. Both ISDA agreements and collateral agreements aremeans to reduce overall credit risk.

Fair value of derivatives with positive replacement value for Telenor ASA was equivalent NOK 1,498 million as of 31 December2002, taking into account netting agreements. Credit exposures for Telenor ASA is monitored on a daily basis.

Liquidity risk

Liquidity risk is the risk that companies in the Group do not have liquidity available to pay their obligations on time.

The Group has established Group account systems in Norway, Sweden, Denmark, Hungary and the United Kingdom to managethe cash flows in the Group as efficient as possible. Efficient cash management also involves using currency swaps whenappropriate.

Surplus liquidity within the Group account systems is invested in interest bearing instruments with short time to maturity andlow default risk. Telenor ASA has also established two credit facilities to minimize the Group’s liquidity risk, see note 20.

Management emphasizes financial flexibility. An important part of this is to minimize liquidity risk through ensuring access to adiversified set of funding sources.

Other market risks

Telenor is exposed to equity market risk through investments in equity instruments.

Fair values of financial instruments

The estimated fair values of the company’s financial instruments are based on market prices and the valuation methodologiesdescribed below. However, prudence is recommended in interpreting market data to arrive at an estimated fair value. Accord-ingly, the estimates presented herein may only be indicative of the amounts the company could realize at this date.

Fair values of debt instruments issued by Telenor ASA and Telenor Eiendom Holding AS have been calculated using an interestrate curve, which incorporates estimates of the Telenor ASA credit spreads as of 31 December 2002. The credit curve has beenextrapolated from trades observed in the secondary market of Telenor ASA debt instruments with different maturities.

Fair value of debt instruments issued by subsidiaries has been determined by market quotes where such are available. Fairvalue of other floating rate instruments in subsidiaries is assumed to be equal to the book value.

For all other interest bearing liabilities fair values have been estimated using the Telenor ASA credit curve described above.

Fair values of currency swaps, foreign currency forward contracts and interest rate swaps are estimated by the present valueof future cash flows, calculated by using quoted swap curves and exchange rates as of 31 December 2002. Options are reval-ued using appropriate option pricing models.

Fair values for listed shares are based on quoted prices at the end of the relevant years. Listed companies consolidated in theTelenor Group or accounted for by using the equity method, are not included in the table below.


The table below shows book value and fair value of financial instruments as of 31 December 2002 and 2001: Book value Fair value Book value Fair value

(in NOK millions) 2002 2002 2001 2001

Financial assets

Listed shares 296 275 428 466

Cash and short-term money market investments 5,524 5,524 5,711 5,711

Financial liabilities

Long-term interest bearing liabilities1) (29,105) (29,813) (19,219) (19,422)

Short-term interest bearing liabilities (3,591) (3,591) (672) (672)

Instruments used for interest rate and exchange rate risk management

Gain interest rate swaps - 205 - 83

Loss interest rate swaps - (214) - (112)

Loss forward rate agreements - - - -

Gain interest rate options 2 1 1

Loss interest rate options - (4) - -

Gain cross currency interest rate swaps1) 1,153 1,528 1,200 1,373

Loss cross currency interest rate swaps1) (853) (697) (478) (385)

Gain foreign currency forward contracts 34 34 13 13

Loss foreign currency forward contracts (167) (167) (96) (96)

1) These items are included in long-term interest-bearing liabilities in the balance sheet.

22. NON-INTEREST-BEARING LIABILITIES


Accounts payable 3,072 2,762

Government taxes, tax deductions etc 2,199 2,002

Dividends payable 799 621

Current taxes 2,717 3,421

Accrued expenses 5,315 4,731

Prepaid revenues 2,647 1,701

Provision for workforce reductions etc.1) 977 590

Other current liabilities 399 794

Total current non-interest-bearing liabilities 18,125 16,622

Long-term non-interest-bearing liabilities 473 388

Total non-interest-bearing liabilities 18,598 17,010

1) The provisions are related to workforce reductions, loss contracts, exit from activities and legal disputes.

23. MORTGAGES AND GUARANTEES


Mortgages

Inventories, receivables, tangible assets, etc 9,892 5,000

As of 31 December 2002 NOK 3,278 million of the interest-bearing liabilities of the Group was secured by pledged assets, witha book value of NOK 9,892 million. The mortgages and the liabilities related mainly to DiGi.Com, Kyivstar, GrameenPhone andthe satellite leases (Thor II and Thor III).


Guarantees 2,515 2,719

Guarantees provided, where the related liability is included in the balance sheet are not shown in the table. Furthermore, guar-antees related to unused drawing rights in Group companies and purchased bank guarantees are not included. Guarantees asof 31 December 2002 are described below.

In 2000, when Bravida was still a subsidiary, Telenor provided a performance (fulfillment) guarantee in connection with Bravi-da’s deliveries to the project Södra Länken in Sweden, with an original project limit for Bravida of NOK 515 million. The projectis expected to be completed in 2004/2005.

In 2001, Telenor provided a guarantee to Intelsat of USD 117 million (NOK 815 million as of 31 December 2002) for the fulfill-


ment of the committed investment of NOK 1.052 million in satellite capacity in 2004, included as contractual investments innote 25.

In 2002, Telenor’s previous contractual commitment to contribute capital to the associated company Connect Austria wasreplaced with a guarantee for up to approximately EUR 68 million (NOK 493 million as of 31 December 2002). The guarantee isin favour of the lenders of interest-bearing financing to Connect Austria, and payment may be required if the financialcovenants in these loan agreements are breached.

Telenor has provided a guarantee of USD 25 million (NOK 174 million) for a termination fee of the Cross Border Tax BenefitLease-agreement for GSM mobile networks, see note 15. The leasing period ends in 2015.

Telenor has provided a guarantee for a termination fee of the satellite leases (Thor II and Thor III) of NOK 171 million. The leas-ing periods end in 2008 and 2010.

As of 31 December 2002, Telenor had provided a guarantee of USD 10 million (NOK 70 million) for the liabilities in the associ-ated company StavTeleSot. StavTeleSot was sold in the beginning of 2003, and Telenor was relieved from the guarantee.

Telenor has provided a guarantee up to NOK 165 million for potentially future capital contribution to Telenor pension fund.

In addition, Telenor has provided performance and payment guarantees for subsidiaries of an aggregate amount of approxi-mately NOK 110 million.

24. COMMITMENTS AND CONTINGENCIES

Telenor is involved in a number of legal proceedings, including among others those described below, concerning mattersarising in connection with the conduct of Telenor’s business. Provisions have been made to cover unfavorable rulings ordeviations in tax assessments, pending the outcome of appeals by Telenor against these decisions, as described below. Further-more, provisions have been made to cover the expected outcome of the other proceedings to the extent that negative out-comes are likely, and reliable estimates can be made. However, most of the proceedings against Telenor are of such a naturethat provisions cannot be estimated. While acknowledging the uncertainties of litigation Telenor believes that, based on theinformation available to date, these matters will be resolved without any material negative effect on Telenor’s financial position.

In January 2003, Telenor initiated proceedings against the Norwegian tax authorities before the Oslo District Court relating tothe non-recognition of a tax loss deriving from an intra-group sale of shares in Sonofon Holding A/S. The disputed amount isapproximately NOK 8.6 billion, which results in a tax charge of NOK 2.4 billion. The Oslo District Court has not yet set a date forthe court proceedings.

In April 2001, the company S&A Telecom Cyprus Ltd., on behalf of WR Com Enterprises Ltd., initiated legal proceedings againstTelenor before the civil court of Athens, Greece, claiming approximately NOK 444 million plus interest related to disputesunder several agreements entered into in connection with ownership interests in Cosmote. In January 2003, the court ruledthat Telenor is obliged to pay WR Com Enterprises Ltd. approximately NOK 444 million plus interest. Telenor will appeal theruling. WR Com Enterprises Ltd. had also commenced arbitration proceedings in Oslo based on similar grounds in the samecomplex of cases, but withdrew the arbitration case in October 2002.

In July 2002, TDC Tele Danmark AS, Telia Mobile AB, Sonera AB and Iceland Telecom Ltd. initiated in legal proceedings againstTelenor before a court of arbitration. The claimants are asking for compensation of 36.65% of the market value (to be deter-mined in a separate arbitration to take place later based on the assumption of joint ownership of the earth stations) of the“INMARSAT earth stations at Eik and associated activities” as per 31 December 2002. The arbitration panel has been estab-lished, and the hearing is scheduled for October and November 2003.

In August 2001, the Norwegian State Railways (Norges Statsbaner, NSB) initiated legal proceedings against Telenor beforethe Oslo District Court claiming that an agreement previously entered into between the parties concerning the allocation ofcosts related to contamination of a site used for the treatment of telephone poles with creosote is not binding for NSB. NSB'sclaim is for NOK 122 million plus interest. The hearing was held in March 2003.

In 1997, Teletopia AS initiated legal proceedings against Telenor before the Oslo District Court claiming, among other things,that the termination of agreements entered into with Teletopia in 1995 was invalid and that Telenor should be ordered to paycompensation as determined by the court. In April 2001, the Oslo District Court ruled that Telenor was to pay compensation ofNOK 23.5 million to Teletopia. Telenor appealed the decision and Teletopia cross-appealed requesting additional compensa-tion. Teletopia has now estimated its claim to be up to NOK 250 million plus interest. The main hearing before the Court ofAppeal is scheduled to be held during ten weeks starting September 2003.

Tele2 has initiated several proceedings against Telenor relating to Telenor’s allegedly delayed implementation of carrier pres-


election, a requirement which the Norwegian Post and Telecommunications Authority (Post-og teletilsynet, PT) introduced in1999.The most substantial proceedings still pending is the proceeding filed at Oslo District Court in May 2002, in connectionwith which Tele2 claims NOK 102 million plus interest in damages. As a result of an arbitration based on similar grounds on 11April 2002, Song Networks was awarded compensation of NOK 15 million of a claim of NOK 52 million.

25. CONTRACTUAL OBLIGATIONS

The Group has entered into agreements with fixed payments in the following areas as of 31 December 2002:

(in NOK millions) 2003 2004 2005 2006 2007 After 2007

Rent of premises 746 546 425 372 332 931

Rent of cars, office equipment, etc. 107 56 29 11 4 9

Rent of satellite capacity, etc. 945 173 605 53 32 37

IT-related agreements 420 231 101 15 1 -

Other contractual obligations 679 186 160 9 - -

Committed investments

Associated companies 4 19 - - - -

Properties and equipment 348 2 2 2 2 -

Other contractual investments 269 1,056 - - - -

Total contractual obligation 3,518 2,269 1,322 462 374 977

The table does not include agreements under which Telenor has no binding obligation to purchase, or future investments dueto the UMTS license in Norway. Rent of satellite and networks capacity includes payments for a MVNO-agreement (Mobile Vir-tual Network Operator) with NOK 358 million and NOK 517 million for 2003 and 2005, respectively.

Other contractual investments for 2004 include NOK 1,052 million for investment in satellite capacity. This investment hasbeen postponed to 2004 as a result of delayed launch.

26. RELATED PARTIES

Telenor ASA is 77.7% owned by the Norwegian state (including treasury shares).

The Norwegian telecommunications market is governed by the Telecommunications Act and other regulations issued pursuantto this Act, as well as by concessions (licenses) for certain activities. According to the concession on fixed network and thepublic telephony service, Telenor must provide and maintain Universal Service Obligations (USO) — PSTN telephony to allhouseholds and companies, public pay phones, services for the disabled, emergency services — and Special Service Obliga-tions (SSO) — the defense of Norway, coastal radio, services concerning Svalbard, wire services for ships, provisions of emer-gency lines for the police, fire department and ambulances — at a certain level. Telenor receives no compensation from thestate for the provision of USO services, whereas compensation is given to Telenor for the provision of SSO. In 2002, 2001 and2000 Telenor received NOK 82 million, NOK 80 million and NOK 78 million, respectively, under this agreement. Telenor paidNOK 200 million to the Norwegian state for a UMTS license in 2000.

In addition, Telenor provides mobile and fixed telephony services, leased lines, customer equipment, Internet connections, TVdistributions and installation and IT operations/services to the state in the normal course of business and at arm's-length prices.In 2000 Telenor sold its headquarters for NOK 550 million to Entra Eiendom AS, a Norwegian government-owned entity, andSelmer ASA. Telenor leased back the administrative premises pending the completion of our new headquarters at Fornebu.

Telenor pays an annual fee to the Norwegian Post and Telecommunications Authority (“PT”) for delivering telephony andmobile services. The fee was NOK 81 million in 2002, NOK 81 million in 2001 and NOK 61 million in 2000, respectively.

Canal Digital is a wholly-owned subsidiary of Telenor, performing satellite Broadcasting. The company was owned 50% byTelenor up to 30 June 2002, when Telenor completed the acquisition of the remaining 50% of the company and started con-solidating the company. Canal Digital has agreements to sell products and services to other Telenor companies, mainly satel-lite broadcasting and cards for TV-decoders. The total amount invoiced for these products and services was NOK 223 millionin 2002 (half year), NOK 475 million in 2001 and NOK 282 million in 2000, respectively. The transactions were based onarm's-length agreements.

Associated companies abroad hire personnel from Telenor. A total of NOK 21 million, NOK 29 million and NOK 24 million wasinvoiced for these services in 2002, 2001 and 2000, respectively.

Bravida has been an associated company from 1 November 2000, when Bravida was merged with BPA AB. Telenor’s ownershipshare was 46.4% as of 31 December 2002. According to a shareholders agreement entered into at the time of the merger,Telenor shall decrease its ownership share in event of a listing of Bravida, and Telenor’s ownership share may increase if cer-


tain specified assets (“referred to as “non-core assets”) of the former BPA show a shortfall in value compared to the valuethat was estimated in the merger. In 2002, Group companies purchased goods and services for NOK 2,256 million from Bravi-da, NOK 2,636 million in 2001 and NOK 491 million for two months in 2000, mainly for installation and other services. NOK 85million, NOK 450 million and NOK 173 million in 2002, 2001 and 2000, respectively, were invoiced from Group companies toBravida for sale of customer equipment and administrative services. Bravida also has agreements which ensures that Bravidais awarded a certain share of the purchases Telenor Networks will make related to installation and other services until the endof 2005. The transactions are based on arm's-length prices. Telenor had provided guarantees related to Bravida of NOK 515million as of 31 December 2002 related to a fulfillment guarantee regarding Södra Länken, which is a project in Sweden.Telenor had outstanding loans of NOK 442 million to Bravida as of 31 December 2002, of which approximately NOK 430 millionwas long-term. As of 31 December 2002, Telenor had outstanding liabilities to Bravida of NOK 20 million. In February 2003,Telenor provided a short-term convertible loan of NOK 150 million to Bravida. In February 2003 Telenor provided a financialguarantee to Svensk Eksportkreditt of SEK 331 million plus interest related to the Bravida engagement, in connection withwhich external parties have provided collateral security in the form of mortgages of shares.

The associated company TeleVenture Management AS performs management services for Telenor Venture and Telenor Venture II.TeleVenture Management AS invoiced NOK 20 million in 2002, NOK 17 million in 2001 and NOK 32 million in 2000.

Zebsign, established in 2001 with 50% ownership by Telenor, delivers services for electronic identification and signature. In2002 Zebsign had revenues for sale to other Telenor companies of NOK 41 million and NOK 43 million in 2001. As of 31 Decem-ber 2002, Telenor had a purchase commitment of NOK 45 million.

27. ADDITIONAL INFORMATION ABOUT CASH FLOW

With the exception of certain companies, the Group has established tax deduction guarantees for payment of the employees'tax deductions. The Group has established Group bank accounts with two banks. Under these agreements, Telenor ASA is theGroup account holder, whereas the other companies in the Group are sub-account holders or participants. The banks can setoff balances in their favor against deposits, so that the net position represents the net balance between the bank and theGroup account holder.

Restricted bank accounts


For employees' tax deduction 88 114 24

Other 45 179 52

Total 133 293 76

Material non-monetary transactions


Investments in businesses 105 678 -

Financial leases 346 - -

Purchase of software licenses - - 1,006

Total 451 678 1,006

28. MANAGEMENT COMPENSATION ETC.

Jon Fredrik Baksaas was appointed as President and Chief Executive Officer and Tormod Hermansen withdrew as President andChief Executive Officer on 21 June 2002. Some other changes in the Group management have also been implemented duringthe year. The new Group management from 6 December 2002 consists of Jon Fredrik Baksaas, Arve Johansen, TorsteinMoland, Berit Svendsen, Jan Edvard Thygesen, Stig Eide Sivertsen and Morten Karlsen Sørby (new).

Aggregate remuneration for the board of directors and the corporate assembly for 2002 was NOK 1,475,000 and NOK407,000, respectively. The members of the board of directors do not have any agreements which entitles them to extraordi-nary remuneration in the event of termination or change of office, or agreements for bonus, profit sharing, options or similar.

The annual salary for the President and Chief Executive Officer Jon Fredrik Baksaas was NOK 3,200,000 in 2002. Telenor paidpension premiums of NOK 734,223 (from 21 June 2002), and other compensation of NOK 51,479. Jon Fredrik Baksaas has noannual bonus agreement, but was granted 100,000 share options on 21 February 2002, 150,000 share options on 22 June2002, and 250,000 share options on 21 February 2003. The pension plan gives the right to retire at the age of 60 with a sup-plementary pension, making the pension 66% of NOK 3,000,000, adjusted annually with the Consumer Price Index. Jon FredrikBaksaas has the right to receive salary for 24 months if Telenor terminates the employment, under the condition that he doesnot take other employment (in such case, the payment is reduced by 75% of the salary of the new employment). The termina-tion payment does not qualify for holiday allowance. The agreed period of notice is six months.

The annual salary for Tormod Hermansen was NOK 3,153,000 in 2002. Telenor paid pension premiums of NOK 726,984 and othercompensation of NOK 52,136 (until 21 June 2002). Furthermore, an end payment equivalent to 6 months salary (NOK 1,576,000)


was paid, and this amount also qualifies for holiday allowance. The end payment was set based on an agreement at the time ofwithdrawal between the Board of Directors and Tormod Hermansen, and covers annual bonus for 2001, plus compensation for notparticipating in bonus programs for 2002. Tormod Hermansen also has an agreement requiring him to be available for TelenorASA one year after withdrawal from the CEO position, agreed upon prior to the date of withdrawal. During this year, the salary andother work conditions are upheld. During this period, Tormod Hermansen is not allowed to take other employment. Furthermore,he cannot take on tasks (or duties) for Telenor competitors. Tormod Hermansen had earned full pension rights at the date of with-drawal (66% of salary at the time of withdrawal), and a “top-up” of NOK 536,010 was paid in addition to the pension payments forthe period in 2002 after withdrawal, according to the above-mentioned agreement of upholding of full salary conditions.

The table below shows information attached to each member of the Group Management, except for Jon Fredrik Baksaas, whichis mentioned above.

Agreed Share

period Severance Pension Annual Options

Name/title of notice Pay benefits5)

Bonus 20021)

20023

Senior Executive Vice President 6 months 6 months 66% of salary at The bonus frame is 61% of fixed 100,000 +

Arve Johansen2) the date of retire- salary. In addition, overperformance 100,000

ment with the right may result in bonus payments

to retire at the age exceeding the bonus frame by

of 60. maximum 50%.

Senior Executive Vice President 6 months 6 months 66% of salary at The bonus frame is 33.3% of fixed 100,000 +

and CFO, Torstein Moland2) the date of retire- salary. In addition, overperformance 100,000



of 60. maximum 50%.

Executive Vice President 6 months - 66% of salary at The bonus frame is 16.7% of fixed 100,000 +

and CTO, Berit Svendsen the date of retire- salary. In addition, overperformance 75,000



of 62. maximum 62.5%.

Executive Vice President 6 months - 66% of salary at The bonus frame is 72.5% of fixed 75,000 +

Stig Eide Sivertsen the date of retire- salary. In addition, overperformance 75,000



of 62. maximum 50%.

Executive Vice President 6 months 6 months 66% of pension- The bonus frame is 33,3% of 70,000 +

Morten Karlsen Sørby qualifying income annual salary 75,000

(from 6 December 2002) at the date of retire-

ment with the right

to retire at the

age of 62.4)

Executive Vice President 6 months 6 months 66% of salary at The bonus frame is 72.5% of fixed 75,000 +

Jan Edvard Thygesen the date of retire- salary. In addition, overperformance 75,000



of 62. maximum 50%.

1) If the budget is reached (for any given bonus criteria), 50% of the bonus frame is paid. Bonus targets are stretched and overperfor-

mance can result based on financial targets or adjustments (up or down) based on non-financial targets. In the table, both these

effects are referred to as overperformance, showing maximum bonus attainable. Overperformance may only result from exceptional

performance. Arve Johansen, Stig Eide Sivertsen and Jan Edvard Thygesen had their salary reduced in 2002 in exchange for an

increase of the yearly bonus frame.

In 2003, the possibilities to obtain bonus based on overperformance based on financial targets will be withdrawn. 2) Arve Johansen and Torstein Moland, both have agreements which entitle them to a possible transfer to other tasks within the organi-

zation with the right to compensation of half their salary. These agreements relate to a specified time period up to the age of retire-

ment. The future pension benefits are based on the salary at the time of transfer to other work. 3) The table shows the share options granted in 2002 and 2003 respectively. The share option programs for 2002 and 2003 are

described in note 29. 4) The Pension-qualifying income will be equal to the salary of 31 December 2002, with an annual regulation according to the

consumer price index.5) Pension-qualifying income will be adjusted in 2003 for the Group Management. Morten Karlsen Sørby has already the pension term

that will be effective for the rest of the Group Management as of 1 January 2003.


Total loans to employees were NOK 50 million as of 31 December 2002. The loans were mainly provided to finance cars pur-chased by the employees as an alternative to company cars and loans were provided in connection with the purchase ofshares in the employee stock ownership program in December 2002 (NOK 15 million). The loans for purchase of shares werelimited to NOK 5,979 per employee after discount. Loans for purchase of shares are non-interest bearing and have terms ofone year. As of 31 December 2002, the three employee representatives on the board of directors each have such loans of NOK5,979, respectively.

The number of shares owned by the members of the board of directors, the corporate assembly and the Group management asof 31 December 2002 is shown below. Shares owned by the board of directors and the Group management includes closelyrelated parties.

The Board of Directors Number of shares as of 31.12.2002

Thorleif Enger (chairman from March 2003) 2.000

Åshild Marianne Bendiktsen 682

Harald Stavn 3,268

Per Gunnar Salomonsen 1,436

Irma Tystad 754

The Corporate Assembly Number of shares as of 31.12.2002

Ragnar Klevaas 682

Eystein Gjelsvik 275

Stein Erik Olsen 754

Berit Kopren 275

Jan Riddervold 1,579

Arne Jensen 407

The Group Management Number of shares as of 31.12.2002

Jon Fredrik Baksaas 20,276

Torstein Moland 11,640

Arve Johansen 24,556

Berit Svendsen 4,297

Jan Edvard Thygesen 30,702

Stig Eide Sivertsen 28,189

Morten Karlsen Sørby 3,218

Fees to auditors

The table below summarizes suggested audit fees for 2002 and fees for audit related services, tax services and other servicesinvoiced to Telenor during 2002. Fees include both Norwegian and foreign subsidiaries.

(in NOK million excluding VAT) Audit fees Audit related fees Fees for tax services Other fees

Telenor ASA

Group Auditor 2.5 5.4 1.5 0.9

Other Group companies

Group Auditor 16.1 6.7 3.0 0.7

Other Auditors 8.1 2.4 1.8 7.1

29. SHARE OPTION PLANS

In the Telenor Group there are three share options programs: One for shares in Telenor ASA, one for the listed subsidiary com-pany EDB Business Partner ASA and one for the listed subsidiary Utfors AB.

Option program for shares in Telenor ASA

In 2002, 85 managers and key personnel were granted options, and 110 managers and key personnel were granted options in2003.

For options granted in 2002: One third of the options are vested each of the three years subsequent to the date of grant. Thelatest possible exercise date is seven years subsequent to the date of grant. The exercise price corresponds to the averageclosing price at Oslo Stock Exchange five trading days prior to the date of grant, increasing with an interest per commencedmonth corresponding to 1/12 of 12 months NIBOR (Norwegian Interbank interest rate). The options may only be exercised fourtimes a year, during a ten-day period after the publication of the company's quarterly results. Latest possible exercise price isNOK 50.96 for options granted on 21 February 2002 and NOK 42.12 for options granted 21 June 2002.


For options granted in 2003: One third of the options are vested each of the three years subsequent to the date of grant andare exercisable if the stock price at the time of exercise is higher than the average closing price at Oslo Stock Exchange fivetrading days prior to the date of grant, adjusted with 5.38% per year. The latest possible exercise date is seven years subse-quent to the date of grant. The exercise price corresponds to the average closing price at Oslo Stock Exchange five tradingdays prior to the date of grant (NOK 26.44). The options may only be exercised four times a year, during a ten-day period afterthe publication of the company's quarterly results.

Share Exercise price at the Remaining Options exercisable

options end of option life1)

option life as of 31 December 2002

Options granted in 2002 (21 February) 2,520,000 50.96

Options granted in 2002 (21 June) 150,000 42.12

Options exercised in 2002 - -

Options forfeited in 2002 55,000 50.96

Balance as of December 2002 2,465,000 50.96 6 years 2)

150,000 42.12 6 years 3)

Options granted 21 February 2003 2,850,000 26.44 7 years 4)

1) Exercise prices for the share option programs of 2002 are calculated at the latest possible date of exercise, and based on 1 2 month

NIBOR implied forward rates calculated of the spot curve (20 February and 20 June each year, respectively). For the share option pro-

gram of 2003, the exercise price is fixed throughout the options’ term, and is NOK 26.44.2) First possible exercise was February 2003 for 1 /3 of the options. 3) First possible exercise is July 2003 for 1 /3 of the options. 4) First possible exercise is February 2004 for 1 /3 of the options.

Option program for shares in EDB Business Partner ASA

The subsidiary EDB Business Partner ASA has stock compensation plans for its employees. The exercise price is based on theshare price when the option was granted and is increased by 1% for each subsequent month until the date of exercise. Most ofthe options that are not exercised according to the plan can be carried forward to the next year. Options granted had one tofour year terms, where one-third of vested options become exercisable each year. Options vest over a one to three year periodof continued employment. Vested but unexercised options can be carried forward to May 2004 or expire.

The share option plan has the approval of the shareholders of EDB Business Partner to grant options for the year ended 31December 2002. The continuation of the plan for 2003 and 2004 requires, and is subject to, additional shareholders approval.Norwegian law requires shareholder approval of share issues, and the board of directors cannot obtain power of attorney toexecute such plan due to the longevity of the exercise period. For the purpose of the financial statements these grants shouldbe considered effective.

Weighted average

Options exercise price

Balance at 31 December 1999 9,360,560 54.46

Options granted in 2000 6,277,134 179.07

Options exercised in 2000 2,722,448 30.79



Options granted in 2001 699,070 106.33

Options exercised in 2001 1,400,594 62.90

Options forfeited in 2001 1,667,104 134.00


Options granted in 2002 269,445 67.01

Options exercised in 2002 - -




The table below details EDB Business Partner's options outstanding by related option exercise price as of 31 December 2002and is based on the final exercise dates. Some options under the new plan may be exercised prior to the termination of theplan.

Weighted Average Exercise Options Weighted Average Options Exercisable

Price (in NOK) Outstanding Remaining Life in years as of 31 December 2002

62 3.876,203 1.3 -

183 4.561,286 1.3 -

137 389,271 1.3 -

106 627,670 1.3 -

67 242,245 1.3 -

124.9 9.696,675 -

Option program for shares in Utfors AB

Utfors AB had a share option program. The program is now closed. The following options was outstanding as of 31 December 2002.

Weighted Average

Weighted Average Exercise Options Remaining Life Options Exercisable

Price (in SEK) Outstanding (in months) as of 31 December 2002

138 216,666 0.5 216,666

300 60,000 6 60,000

25 1,120,000 2.5 1,120,000

173 216,667 12.5 216,667

82 200,000 12.5 200,000

31 840,000 14.5 840,000

89 200,000 24 200,000

217 216,667 24.5 216,667

38 840,000 26.5 840,000

106 200,000 36.5 200,000

1,199 4,110,000 4,110,000

30. NUMBER OF SHARES, SHAREHOLDERS ETC.

Telenor ASA had as of 31 December 2002 a share capital of NOK 10,820,557,032, divided into 1,803,426,172 ordinary shareswith a nominal value of NOK 6 each. All shares have equal voting rights and the right to receive dividends. As of 31 December2002, the company had remaining 28,103,172 treasury shares of the total of 30,000,000, which were issued to Telenor astreasury shares to be used to grant additional bonus shares to retail investors in Norway pursuant to the global offering inDecember 2000. On 4 December 2001, 1,896,828 treasury shares were transferred as additional bonus shares to retailinvestors. The general meeting held in 2001 granted an authority to the Board of Directors that the remaining shares could beused for other purposes.

At the general meeting held on 8 May 2002, it was resolved to grant a authority to the board of directors to increase the sharecapital with an amount up to NOK 1,064,776,488 through issuance of up to 177,462,748 ordinary shares of NOK 6 nominalvalue each. Such authority lasts until 1 July 2003. The Board of Directors may waive the pre-emptive rights of shareholders tosuch shares. The authority includes the issuance of shares against consideration other than cash and the issuance of shares ina merger. The purpose of the authority is to place the company in a better position for future growth. Such an increase in sharecapital may also be used in share option plans for managers and key personnel and stock ownership programs for employees.An employee stock ownership program took place in 2001 and 2002, under which 695,520 shares at a nominal value of NOK 6each were subscribed for in December 2002. Telenor ASA established a share option plan on 21 February 2002, see note 29.At the general meeting in May 2002 approval was given for the Board of Directors to acquire up to 90,136,532 own shares witha nominal value totaling NOK 540,819,192. The amount paid per share shall be a minimum of NOK 6 and a maximum of NOK200. Such authority lasts until 1 July 2003.

The following shareholders had 1% or more of the total number of 1,775,323,000 outstanding shares (excluding the 28,103,172million treasury shares) as of 31 December 2002.

Name of shareholders Number of shares %

Ministry of Trade and Industry 1,400,000,000 78.86

National Insurance Scheme Fund 44,524,000 2.51

State Street Bank (nominee) 21,512,077 1.21


31. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Group's consolidated financial statements have been prepared under Norwegian GAAP, which differs in certain respectsfrom US GAAP. The principal differences between the Group's accounting principles under Norwegian GAAP and US GAAP areset out below:

Reconciliation of net income (loss) from Norwegian GAAP to US GAAP

(in NOK millions, except per share amounts) Note 2002 2001 2000

Net income (loss) in accordance with Norwegian GAAP (4,298) 7,079 1,076

Adjustments for US GAAP:

Depreciation of capitalized interest associated companies 1 (3) (38) (4)

Pensions 2 (24) (25) (25)

Amortization of license costs and related goodwill 3 (2) (27) (3)

Temporary investments in entities 4 12 43 (38)

Gains on subsidiaries equity transactions and disposal of shares

in subsidiary 5 - - 393

Stock compensation 7 - 52 (194)

Sale and lease back of properties 8 49 36 (153)

Derivative financial instruments 9 47 171 -

Goodwill amortization 10 1,631 39 -

Goodwill impairment 10 (390) - -

Measurement date 11 12 - -

Sale of software 12 (345) - -

Tax effect of US GAAP adjustments 13 (68) (56) (48)

Minority interests 7 (279) (270) 78

Net income (loss) in accordance with US GAAP (3,658) 7,004 1,082

Net income from continuing operations (excluding Telenor Media) - 1,889 854

Net income (loss) per share

– From continuing operations (excluding Telenor Media) - 1.066 0.599

– Cumulative effect on prior years of change in accounting principle - 0.033 -

– In accordance with US GAAP (basic) (2.061) 3.952 0.759

– In accordance with US GAAP (diluted) (2.061) 3.948 0.759

Revenues in accordance with US GAAP 47,879 40,581 36,481

Reconciliation of shareholder's equity from Norwegian GAAP to US GAAP


Shareholder's equity in accordance with Norwegian GAAP 33,685 42,144

Adjustments for US GAAP:

Dividends 14 799 621

Capitalized interest associated companies 1 25 28

Pensions 2 116 140

Amortization of license costs and related goodwill 3 20 22

Temporary investments in entities 4 (98) (110)

Gains on subsidiaries' equity transactions and disposal of shares in subsidiary 5 700 700

Marketable equity securities net of tax 6 (17) 27

Stock compensation 7 (172) (172)

Sale and lease back of properties 8 (68) (117)

Derivative financial instruments 9 (114) (30)

Goodwill amortization 10 1,670 39

Goodwill impairment 10 (390) -

Measurement date 11 683 -

Sale of software 12 (345) -

Minimum pension liability 2 (34) -

Tax effect of US GAAP adjustments 13 (223) (188)

Minority interests 5 (438) (160)

Shareholder's equity in accordance with US GAAP 35,799 42,944

Total assets in accordance with US GAAP 97,511 90,129

Long-term interest-bearing liabilities in accordance with US GAAP 33,957 24,758


The following table reflects the components of comprehensive income under US GAAP


Net income (loss) in accordance with US GAAP (3,658) 7,004 1,082

Other comprehensive income

– Unrealized gain (loss) on available for sale securities, net of tax (42) 99 (210)

– Translation adjustment (2,818) 47 (349)

Minimum person liability, net of tax (24) - -

Total other comprehensive income (2,884) 146 (559)

Comprehensive income (6,542) 7,150 523

(1) Capitalized interest

Under Norwegian GAAP the Group has expensed interest incurred in connection with the financing of associated companies.

Under US GAAP interest incurred on equity funds, loans and advances to associated companies, under a period which theassociated company is undergoing activities necessary to start its planned principal operations and such activities include theuse of funds to acquire qualifying assets for its operations, shall be capitalized.

(2) Pensions

In 1995 the Group began to account for pensions according to the accounting standard which is substantially consistent withUS GAAP. The change in accounting principle was offset directly against shareholder's equity.

Under US GAAP the effect of adopting SFAS 87 would be amortized over the remaining average service period.

In accordance with US GAAP a provision is recorded directly against shareholders equity where the accumulated benefit obli-gation (ABO) exceeds plan assets. This is not in accordance with Norwegian GAAP.

(3) Amortization of license costs and related goodwill

Up to the end of 1997 the Group amortized license costs and goodwill related to acquired licenses over a period not exceeding10 years. With effect from 1998 the amortization period has been changed to the term of the license. In accordance with Nor-wegian GAAP this change has been accounted for as a change of estimate, with no retroactive restatement of prior periods.

Under the US GAAP reconciliation, this revision in the amortization period was accounted for retroactively.

(4) Temporary investment in entities

Investments in entities in which the Group has an ownership that is considered to be temporary in nature are recorded at costor written down to fair value. The Group invests periodically in companies for the purpose of making profits.

Under US GAAP, all temporary investments with an ownership greater or equal to 20% are accounted for under the equity methodor consolidated. The effect on the financial statements of temporary investments consolidated under US GAAP are immaterial.

Total assets accounted for under the equity method for US GAAP was NOK 14,389 million for the year ended 31 December 2001and NOK 9,627 million for the year ended 31 December 2002.

Total assets accounted for under the cost method for US GAAP was NOK 95 million for the year ended 31 December 2001 andNOK 64 million for the year ended 31 December 2002.

(5) Gain from subsidiaries equity transactions, disposal of shares in a subsidiary and minority interest

Under Norwegian GAAP, no gains from subsidiary's equity transactions and disposal of shares in a subsidiary are recognized.

Under US GAAP, the Group records gains from subsidiary equity transactions (SAB 51 transactions) and disposal of shares in asubsidiary through income.

Under Norwegian GAAP, the minority interest is measured at fair value of the consideration paid from the minority. The differ-ence between the recorded equity in the subsidiary and value of the consideration paid by the minority will be amortized orwritten down through allocating results to minority.

This allocation is not consistent with US GAAP.

The following information relates to the issuance of subsidiary shares in 2000, 2001 and 2002 under US GAAP:Telenor reduced its ownership stake in EDB Business Partner ASA when EDB Business Partner ASA issued shares to minorityshareholders for cash in two transactions in February and May 2000, reducing Telenor's ownership by 7.3%. In particular, EDB


Business Partner ASA issued 6.9 million shares in February 2000 at a price per share of NOK 137. Telenor did not participate inthis issue, and Telenor's ownership was reduced from 59.6% to 54.2%. EDB Business Partner ASA issued another 10 millionshares in May 2000 at a price per share of NOK 100. Also during May 2000, 2.7 million share option subscriptions by employ-ees took place at an average price per share NOK 37.73. Telenor's ownership was thereby reduced from 54.2% to 52.6%. Totalconsideration received from minority shareholders was NOK 1,449 million and recognized gain under US GAAP was NOK 393million. In May 2001 1.4 million shares were issued by the employees share option subscriptions at an average price of NOK48.26 per share. Taxes have been accrued in the tax effect line item of US GAAP adjustments.

(6) Marketable equity securities

For investments in marketable equity securities classified as current assets that are managed as a portfolio, adjustment in thebook value are only made if the aggregate holdings have a lower estimated fair value than the original cost. Other marketableshares are valued at the lower of cost or fair market value. Investment in marketable equity securities classified as long-termare valued at historical cost or possibly fair value if the decline in value is not temporary.

Under US GAAP, marketable equity securities are valued at their fair value for each security. For marketable equity securitiesclassified as available for sale, unrealized gains and losses after tax are recorded directly to shareholder's equity. All listedshares are classified as available for sale in accordance with SFAS 115.

As of 31 December 2001 and 2002, available for sale securities at cost amounted to NOK 384 million and NOK 280 million,respectively, with unrealized holding gain of NOK 38 million for 31 December 2001 and NOK 21 million for 31 December 2002,respectively. For the years ended 31 December 2001 and 2002, proceeds from the sale of available for sale securities was NOK94 million and NOK 19 million, respectively. The gross realized loss from such sales was NOK 238 million in for the year ended31 December 2001 and NOK 5 million for the year ended 31 December 2002, respectively.

(7) Stock compensation

In 2002, Telenor introduced a share option program granting options to 85 managers and key personnel to subscribe up to2,670,000 of Telenor’s shares

The subsidiary EDB Business Partner ASA also has a stock compensation plans for its employees.

In accordance with Norwegian GAAP, the Group did not recognize expense for stock options with no intrinsic value that weregranted to employees.

In accordance with US GAAP, the measurement date for determining compensation costs for stock options is the first date atwhich the number of shares the employee is entitled to receive and the exercise price of the options are known.

When Telenor ASA granted the stock options the number of shares was known at the grant date, however, the exercise price tobe paid was not known when the employee would exercise the option. Accordingly, variable plan accounting for these optionswould apply under US GAAP and the intrinsic value of the options at the end of each reporting period, based on the presumedexercise price and the quoted market price of Telenor’s stock, would be calculated and recorded as compensation expenseover the vesting period.

When EDB Business Partner ASA granted stock options, the number of shares was known at the grant date, however, the exer-cise price to be paid was not known because it was not known when the employee would exercise the option. Accordingly, vari-able plan accounting for these options would apply under US GAAP and the intrinsic value of the options at the end of eachreporting period, based on the presumed exercise price and the quoted market price of EDB Business Partner's stock, would becalculated and recorded as compensation expense over the vesting period.

Options for EDB Business Partner ASA are vested over a one to three year period of continued employment. Vested but unex-ercised options can be carried forward to May 2004 or expire. Of the total options outstanding at year-end, options for 1.7million shares have been accounted for as fixed plan awards. In fixed plan awards, the measurement date occurs on the grantdate when both the number of shares of stock that may be acquired and the price to be paid by the employee are known. Theoptions for the remaining 8.0 million shares of stock are considered variable plan grants because terms do not define the ulti-mate exercise price of the options.

Telenor and EDB Business Partner have elected to follow Accounting Principles Board Opinion No. 25, “Accounting for StockIssued to Employees” (APB 25) and related interpretations in accounting for its employee stock options. However, pro formainformation regarding net income and earnings per share is required by FASB Statement No. 148, “Accounting for Stock-BasedCompensation” (SFAS 123), and has been determined as if Telenor and EDB Business Partner had accounted for its employeestock options under the fair value method of that Statement. The fair value for these options was estimated at the date ofgrant using a Black-Scholes option pricing model with the following weighted-average assumptions. The assumptions for2002 were risk-free interest rates of 5.85%; dividend yield of 2% for Telenor and of zero for EDB Business Partner; volatility


factor of the expected market price of 32% for Telenor’s common shares and 30% for EDB Business Partner's common shares;and a weighted-average expected life of the options of 6.3 years for Telenor and 1.3 years for EDB Business Partner. TheBlack-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vest-ing restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assump-tions including the expected stock price volatility. Because the employee stock options have characteristics significantly dif-ferent from those of traded options, and because changes in the subjective input assumptions can materially affect the fairvalue estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fairvalue of its employee stock options. Had compensation cost for these plans been determined consistent with SFAS 123, theGroup's net income (loss) according to US GAAP would have been the following:

in NOK million (except per share amounts) 2002 2001 2000

Net income (loss) as reported (3,658) 7,004 1,082

Deduct stock based employee compensation expense included in reported

net income, net of tax effects - (52) 194

Add stock based employee compensation expense determined under fair

value based method for all awards, net of tax (34) (94) (133)

Pro forma net income (loss) in accordance with US GAAP (3,692) 6,858 1,143

Net income (loss) per share in accordance with US GAAP

Basic as reported in accordance with US GAAP (2.061) 3.952 0.759

Basic proforma in accordance with US GAAP (2.081) 3.870 0.802

Diluted as reported in accordance with US GAAP (2.061) 3.948 0.759

Diluted pro forma in accordance with US GAAP (2.081) 3.866 0.801

The stock options may have a dilutive effect.

A summary of Telenor’s and EDB Business Partner's stock option programs and related information for the years ended 31December are given in note 29.

(8) Sale and lease back of properties

Under Norwegian GAAP the Group recognized gains from sale and lease back of properties when the lease back agreement isan operating lease agreement.

Under US GAAP only gain from sale and lease back of properties that exceed the net present value of the lease back agree-ment can be recognized as gains. The remaining gains must be deferred over the lease periods.

(9) Derivative financial instruments

Effective 1 January 2001, US GAAP introduced Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting forDerivative Instruments and Hedging Activities,” as amended by SFAS No. 138. This accounting standard requires that all deriv-ative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness ofhedging relationships for which hedge accounting is applied.

Interest rate derivatives not held for trading purposes are carried at cost under Norwegian GAAP. Under US GAAP all deriva-tives are now recorded marked-to-market and recognized on the balance sheet at fair value.

Under Norwegian GAAP Telenor may combine more than one instrument in hedging of net investments. Under US GAAP thereare more stringent requirements of what instruments can be designated as hedging instruments, and foreign exchange gainsor losses are to a greater extent reported through earnings under US GAAP than Norwegian GAAP. Telenor's policy is to useinstruments that may be used as hedging under both Norwegian GAAP and US GAAP, as long as this is cost effective.

The following information relates to derivative financial instruments under SFAS 133:

Derivative (and nonderivative) instruments designated as fair value hedging instruments

A significant portion of the debt issued by Telenor is fixed rate bonds (88% of outstanding bonds as of 31 December 2002).Fixed rate bonds with long maturities impose a greater interest rate risk – in terms of mark-to-market risk – than managementwishes to take on. As such the interest rate exposure on these bonds is often altered through entering into a derivative instru-ment that allows Telenor to receive a fixed interest and pay a specified floating interest rate. Telenor has designated thesederivatives as fair value hedging relationships.


A common strategy for Telenor is to issue a fixed rate bond in the currency in which funding is to be raised and consequentlyenter into a “receive fixed/pay floating” interest rate swap. These fair value hedging relationships typically qualify for short cuttreatment, as the requirements set out in paragraph 68 of SFAS 1331) are met.

A second hedging strategy for Telenor is to hedge a fixed rate bond issued in currency other than Norwegian Kroner with areceive “fixed non base/pay floating” base cross currency interest rate swap. In these cases the hedged risks would be bench-mark interest rates and exchange rates2). The swap would be the hedging instrument and the bond would be the hedged objectin the fair value hedging relationship. In certain cases a combination of swaps are designated as the hedging instrument. Shortcut treatment would not be applicable using this strategy. Still the hedging effectiveness for these hedging relationships hasproven to be close to 100%, which has been in line with management's expectations given the cash flows of the transactionsinvolved.

Derivative instruments designated as cash flow hedging instruments

Telenor has not designated any cash flow hedging relationships during the fiscal year 2002.

Derivative (and nonderivative) instruments designated as hedging instruments of a net investment in a foreign

operation

As described in Note 21 to the financial statements Telenor hedges net investments in foreign currency by issuing debt in thevarious currencies or through entering into derivative transactions. Material hedging positions have been designated as netinvestment hedges. In 2002 the instruments involved have been bonds and forward contracts. To the extent these hedgingrelationships have proven to be effective, translation adjustments on these hedging instruments have been reported in theCumulative Translation Adjustment section of equity.

Derivatives not designated as hedging instruments

Telenor has a duration-based target for interest rate risk management. Interest rate swaps are used to periodically rebalancethe portfolio in order to be in line with the duration target. These derivatives do not qualify as hedging instruments, and aremarked-to-market-through earnings.

Foreign currency swaps are frequently used for liquidity management purposes. No hedging relationships are designated inrelation to these derivatives, and any changes in fair value are recognized through earnings.

Quantitative information

Fair value hedging relationships; in NOK millions

Net loss recognized in 2002 earnings hedged items: 124

Net gain recognized in 2002 earnings hedging instruments (129)

Amount of hedge ineffectiveness (5)

No components of the derivative instruments' gain or loss have been excluded from the assessment of hedge effectiveness.

Hedges of foreign currency exposure of a net investment in a foreign operation;

Net amount of gains on hedging instruments included in the cumulative translation adjustment during 2002 was NOK 1,139million.

For forward contracts the forward points have been excluded in determining hedge effectiveness. The hedge ineffectivenesscharged to profit and loss in this context is immaterial.

Cash flow hedging relationships;

Not applicable.

(10) Goodwill amortization and impairment of goodwill

Effective 1 July 2001, Telenor adopted Statement of Financial Accounting Standards No. 141 (SFAS 141), “Business Combina-tions” and effective 1 January 2002, Telenor adopted the full provision of Statement 141 and Statement No. 142 (SFAS 142),“Goodwill and Other Intangible Assets”. SFAS 141 requires all business combinations initiated after 30 June 2001 to beaccounted for under the purchase method. SFAS 141 also sets forth guidelines for applying the purchase method of accountingin the determination of intangible assets, including goodwill acquired in a business combination, and expands financial disclo-sures concerning business combinations consummated after 30 June 2001.


1) A number of requirements are outlined in this paragraph. Among others; the notional amount of the swap matches the principal

amount of the interest-bearing asset or liability, the fair value of the swap at its inception is zero, the formula for computing net

settlements under the interest rate swap is the same for each net settlement.2) The benchmark interest rates in this instance would be the swap rates.

Under SFAS No. 142, goodwill will no longer be amortized on a straight-line basis over its estimated useful life, but will be test-ed for impairment on an annual basis and whenever indicators of impairment arise. SFAS No. 142 prescribes a two-phaseprocess for impairment testing of goodwill. In the first phase Telenor identifies reporting units where goodwill must be testedfor impairment by comparing net assets of each reporting unit to the respective fair value. In the second phase (if necessary)the impairment is measured by determine the fair value of goodwill by assigning the unit’s fair value to each assets and liabili-ty of the unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is theimplied fair value of goodwill. Telenor completed its first phase impairment analysis during the fourth quarter of 2002 andfound one reporting unit with a carrying value in excess of the fair value based on the public quoted stock price adjusted toreflect a control premium. Accordingly, the second testing phase was necessary and was performed with assistance of externalvaluation experts. This resulted in impairment loss of goodwill of NOK 2,252 million recorded under US GAAP.

In accordance with Accounting Principles Board (“APB”) Opinion No. 20, “Accounting Changes,” the effect of this accountingchange is reflected prospectively. Supplemental comparative disclosure according to US GAAP, as if the change had beenretroactively applied, is as follows:

(in NOK millions, except per share amounts) 2001 2000

Reported net income 7,004 1,082

Goodwill amortization, net of tax and minority interests 1,840 1,179

Adjusted net income 8,844 2,261

Earnings per share

Reported earnings per share 3.952 0.759

Goodwill amortization per share net of tax and minority interests 1.037 0.826

Adjusted earnings per share 4.989 1.585

Under Norwegian GAAP goodwill is amortized. At year end 2002 goodwill was also considered to be impaired for the reportingentity based on the same valuation as under US GAAP. An impairment loss of NOK 2.1 billion was recorded as the differencebetween the carrying value and the fair value based on the quoted market share price adjusted to reflect a control premium.The second step of the goodwill impairment test is not consistent with Norwegian GAAP.

(11) Measurement date

Under US GAAP the measurement date is the date assets are received and other assets are given, liabilities are assumed orincurred, or equity interests are issued, which is consistent with the date of consolidation

Under Norwegian GAAP the measurement date is the date the risk for the company’s results of operations is transferred. Theacquired company’s results, amortization of net excess values and calculated financing expenses have been recorded directlyagainst the Group’s shareholders’ equity in the period between the date for transfer of risk and the date of consolidation. Thedate of consolidation is consistent with US GAAP. This has resulted in a charge directly to shareholder’s equity under Nor-wegian GAAP that is not consistent with US GAAP and a different valuation of tangible and intangible assets under NorwegianGAAP compared to US GAAP and therefore also differences in subsequent depreciation and amortization.

(12) Sale of software

Telenor is a provider of full service application and IT operating systems services. Under Norwegian GAAP, revenue from saleof software licenses and software upgrades. Is recognized upon the delivery of the software licenses and software upgradesunder US GAAP, revenue from sale of software lisences and software upgrades is deferred and recognized as revenue overremaining software maintenance period as the customer does not have access to the software unless Telenor provides soft-ware maintenance. In addtion, in conjuction with these contracts, the Company may develop additional applications that arenot essential to the use of the software. Under Norwegian GAAP, the fees for the development of the additional software arerecognized based on the percentage of completion method of accounting. Under US GAAP, these development fees are alsodeferred and recognized as revenue over the remaining software maintenance period.

(13) Taxes

The income tax effects of US GAAP adjustments are recorded as deferred taxes.

(14) Dividends

Under Norwegian GAAP, dividends payable reduce shareholder's equity for the year in which they relate.

Under US GAAP, dividends payable are recorded as a reduction of shareholder's equity when approved.

(15) Cross border tax benefit leases

The Group has offset the future lease obligations under the digital telephone switches and the GSM Mobile telephone networkcross border tax benefit lease transaction against the unused prepayments on deposits at financial institutions.


Both under Norwegian GAAP and under US GAAP Telenor have deferred the gain from the transactions since there is morethan a remote possibility of loss of the gain due to indemnification or other contingencies.

Under US GAAP, assets and liabilities may not be offset except when there exists the legal right to offset the asset and liability.The legal right to offset the prepaid lease amount against the future lease obligations does not legally exist. Therefore, underUS GAAP, the prepaid lease amounts and the Group's future obligations under the sales-leaseback transactions are recordedgross on the consolidated balance sheet as financial assets and long-term interest-bearing liabilities in the amount ofapproximately NOK 4,830 million for the year ended 31 December 2001 and financial assets and long-term interest-bearingliabilities of NOK 3,557 million for the year ended 31 December 2002. This does not affect the profit and loss statement orshareholder's equity.

At 31 December 2002 future minimum annual rental commitments under capital lease liabilities are as follows under US GAAP:(in NOK millions) As of 31 December 2002

2003 517

2004 639

2005 641

2006 658

2007 814

Later years through 2006 2,894

Total minimum lease payments 6,163

Less amount representing interest 662

Capital lease obligation under US GAAP 5,501

Capital lease obligation under Norwegian GAAP 1,928

Deferred gain (both Norwegian and US GAAP) 208

Capital lease property is included in tangible assets as follows (at net book value):


Switches 221 355

GSM mobile telephony network 478 737

Satellites 732 790

Set top boxes 334 -

Other 105 -

Total 1,870 1,862

(16) Revenue recognition

Under Norwegian GAAP gains on the sale of fixed assets and operations are included in total revenues. Under US GAAP suchgains would be included below other operating income.

Under Norwegian GAAP revenue from telecommunications installation fees and connection fees are recognized in revenue atthe time of the sale and all initial direct costs are expensed as incurred. Under US GAAP, such connection and installation feesthat do not represent a separate earnings process should be deferred and recognized over the periods that the fees are earnedwhich is the expected period of the customer relationship. Initial direct costs to the extent of the deferred revenue should alsobe deferred over the same period that the revenue is recognized. The effect on net income of this difference is not material.

SAB 101

The Company has considered the effect of SAB 101 and determined that it would not have a material effect on net income forany period presented.

New U.S. Accounting Standards

In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to account for arrangements that involvethe delivery or performance of multiple products, services, and/or rights to use assets. Revenue arrangements with multipledeliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1)the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fairvalue of undelivered items; and (3) delivery of any undelivered item is probable. Arrangement consideration should be allocat-ed among the separate units of accounting based on their relative fair values, with the amount allocated to the delivered itembeing limited to the amount that is not contingent on the delivery of additional items or meeting other specified performanceconditions. The final consensus will be applicable to agreements entered into in fiscal periods beginning after 15 June 2003with early adoption permitted. Telenor has not determined the impact that the statement will have on revenues or operatingresult.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective


for financial statements where exit or disposal activities are initiated after 31 December 2002. This statement nullifies EITF Issue94-3, “Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity,” which allowed recogni-tion of a liability for exit and disposal activities upon management's intent to exit or dispose of an activity. This statement requiresthat a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Telenor will adoptthis statement for exit or disposal activities initiated from 1 January 2003.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”This Statement amends SFAS No. 123, “Stock-Based Compensation,” to provide alternative methods of transition for a volun-tary change to the fair value based method of accounting for stock-based employee compensation. In addition, this State-ment amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim finan-cial statements about the method of accounting for stock-based employee compensation and the effect of the method usedon reported results. The disclosure provisions of this Standard are effective for fiscal years ending after 15 December 2002and have been incorporated into these financial statements and accompanying footnotes.


STATEMENT OF PROFIT AND LOSSTelenor ASA

1 January – 31 December for 2002 and 2001. 21 July - 31 December for 2000

(in NOK millions) Note 2002 2001 2000

Revenues 605 270 -

Gains on disposal of operations 63 5,158 -

Total revenues 668 5,428 -

Operating expenses

Salaries and personnel costs 2, 3 350 148 8

Other operating expenses 4 671 381 24

Losses on disposal of operations 5 1,390 - -

Depreciation and amortization 39 6 -

Total operating expenses 2,450 535 32

Operating profit (loss) (1,782) 4,893 (32)

Net financial items 6 (3,494) 5,954 5,565

Profit (loss) before taxes (5,276) 10,847 5,533

Taxes 7 2,650 (4,947) (1,549)

Net income (loss) (2,626) 5,900 3,984

Proposed dividends 799 621 532

Group contribution distributed, net after taxes 137 9,363 2,342


BALANCE SHEETTelenor ASA at 31 December


Assets

Deferred tax assets 7 2,265 -

Other intangible assets 205 223

Tangible assets 46 41

Financial assets 8 85,495 18,706

Total fixed assets 88,011 18,970

Interest-bearing receivables on Group companies - 23,006

Non-interest-bearing receivables on Group companies 258 137

Receivable Group Contribution - 16,336

Non-interest-bearing receivables external 102 131

Cash and cash equivalents - 396

Total current assets 360 40,006

Total assets 88,371 58,976

Equity and Liabilities

Equity 39,202 42,608

Provisions - 6

Long-term interest-bearing liabilities 9 21,470 -

Long-term non-interest-bearing liabilities 195 212

Total long-term liabilities 21,665 212

Short-term interest-bearing liabilities 9 25,583 -

Short-term non-interest-bearing liabilities 10 1,921 16,150

Total short-term liabilities 27,504 16,150

Total equity and liabilities 88,371 58,976

Mortages - -

Guarantee liabilities 11 6,934 1,871

Oslo, 19 March 2003


Thorleif Enger Åshild M. Bendiktsen Hanne de Mora Einar Førde Jørgen LindegaardChairman of the Board Vice-chairman of Board member Board member Board member

of Directors the Board of Directors

Bjørg Ven Harald Stavn Per Gunnar Salomonsen Irma TystadBoard member Board member Board member Board member

Jon Fredrik Baksaas

President & CEO

CASH FLOW STATEMENTTelenor ASA

1 January – 31 December for 2002 and 2001. 21 July – 31 December for 2000


Profit before taxes (5,276) 10,847 5,533

Taxes paid (1,303) (507) -

Net (gain) loss 1,341 (5,158) -

Depreciation and amortization 39 6 -

Group contribution - (16,336) (5,487)

Write-down of shares 5,893 11,705 -

Currency gain not relating to operating activities (457) - -

Changes in accruals etc. (63) (51) (46)

Net cash flow from operating activitites 174 506 -

Purchase of tangible and intangible assets (12) (39) -

Cash receipts from sale of subsidiaries 16 5,326 -

Cash payments on establishing new companies (2,250) (52) -

Cash payments on establishing receivables on Group companies (3,754) (7,550) (15,378)

Purchase of other investments (753) (93) -

Net cash flow from investment activities (6,753) (2,408) (15,378)

Proceeds from long-term liabilities 11,012 - -

Proceeds from short-term liabilities 1,081 598 -

Payments of long-term liabilities (6,935) - -

Payments of short-term liabilities (300) - -

Proceeds from issuance of shares 19 21 15,583

Paid costs in connection with capital increase - (54) (205)

Payments of dividend (621) (532) -

Proceeds from Group contribution 5,682 5,485 -

Payments of Group contribution (3,702) (3,220) -

Net cash flow from financing activities 6,236 2,298 15,378

Effect on cash and cash equivalents of changes in foreign exchange rates (53) - -

Net change in cash and cash equivalents (343) 396 -

Cash and cash equivalents at 1 January 396 - -

Cash and cash equivalents at 31 December - 396 -


STATEMENT OF SHAREHOLDER’S EQUITYTelenor ASA

Other

Share paid Other Treasury

Nom Capital capital equity shares Total

Number Amount (NOK (NOK (NOK (NOK (NOK

of shares (NOK) mill.) mill.) mill.) mill.) mill.)

Equity at establishment considering

contribution in kind 3 October, 2000 1,400,000,000 6 8,400 5,600 4,611 - 18,611

Shares dividend issue 10 November, 2000 30,000,000 6 180 (180) - - -

Treasury shares - 6 180 - (180) -

Shares issue December 2000 372,151,899 6 2,233 13,013 - - 15,246

Net income for 2000 (21.07–31.12) - - - - 3,984 - 3,984

Dividends - - - - (532) - (532)

Balance as of 31 December, 2000 1,802,151,899 6 10,813 18,613 8,063 (180) 37,309

Net income for the year 2001 - - - - 5,900 - 5,900

Dividends - - - - (621) - (621)

Employee share issue 578,753 6 3 17 - - 20

Distribution of own shares - 6 - (11) - (11) -


Net income for the year 2002 - - - - (2,626) - (2,626)

Dividends - - - - (799) - (799)

Employee share issue 695,520 6 4 15 - - 19


NOTES TO THE FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND GENERAL

Telenor ASA is a holding company and contains the Group Management and corporate functions. As of 15 April 2002, Telenor’sinternal bank (Telenor Finans), among other entities, was transferred from Telenor Communications AS (now Telenor EiendomHolding AS) with assets and liabilities, including guarantee liabilities. Furthermore, in 2002 Telenor ASA started some strategicGroup projects, mainly Telenor’s program for improving the efficiency of operations, Delta 4. Consequently the figures for2002 are not directly comparable to 2001. The Group Management was transferred from Telenor Communications AS as of 1January 2001, and corporate functions as of 1 July. In the first six months of 2001, Telenor ASA paid a service fee to TelenorCommunications AS for corporate functions.

In 2001, Telenor ASA owned shares in Telenor Communications AS, and Telenor Communications AS owned shares in a numberof subsidiaries. As a part of the reorganization of the Telenor Group a number of holding companies were established in 2001.In 2002, the shares in Telenor Communications AS were demerged and distributed to the holding companies.

Revenues are mainly management fee from the Telenor Group and sale of consultancy services to other Group companies.Purchases from other companies within the Group consist mainly of consultancy fees in strategic Group projects, propertylease, IT-operations and maintenance.

Telenor ASA conducts the main part of the external debt financing in Telenor, and provides loan to, and receives placements ofliquid assets from Group companies. See note 20 to the consolidated financial statements.

Shares in subsidiaries and loans provided to these are evaluated at cost. Investments in subsidiaries are evaluated as a whole,and adjustments in the book value are only made if the aggregated holdings have a lower estimated fair value than the origi-nal cost or a loss in value for a separate investment is other than a temporary decline. The value of the investments in sub-sidiaries must be viewed together with the values in the consolidated accounts. Write-downs of the values of Telenor ASAsinvestments in subsidiaries have been performed to better reflect the values in the consolidated financial statements. Thewrite-downs are classified as financial items in the profit and loss statement.


Telenor ASA’s accounting principles are similar to the accounting principles for the Telenor Group, as described. Where thenotes for the parent company are substantially different from the notes for the Group, these are shown below. Otherwise referto the notes to the consolidated financial statements for the Group. All profit and loss figures for 2000 covers the period from21 July through 31 December.

2. SALARIES AND PERSONNEL COSTS

The Group’s Chief Executive Officer and the Board of Directors have the same position in Telenor ASA. We refer to note 28 tothe consolidated financial statements for the Group for further information on the compensation to the Board of Directors,management, auditor etc. for the year 2002.

Salaries and Personnel costs 2002 2001 2000

Salaries and holiday pay 213 98 -

Social security tax 36 14 -

Pension cost including social security tax 58 24 -

Other personnel costs 43 12 8

Total salaries and personnel costs 350 148 8

3. PENSION OBLIGATIONS


Change in benefit obligation

Benefit obligation at the beginning of the year 170 -

Service cost 29 19

Interest cost 24 6

Actuarial gains and losses 8 14

Transfer of businesses 216 131

Benefits paid (81) -

Benefit obligations at the end of the year 366 170

Change in plan assets

Fair value of plan assets at the beginning of the year 129 -

Actual return on plan assets (6) 16

Transfer of business 141 91

Pension contribution 42 22

Benefits paid (12) -

Fair value of plan assets at the end of the year 294 129

Funded status 72 41

Unrecognized prior service costs1) (118) (2)

Unrecognized net actuarial losses1) (104) (35)

Accrued social security tax (20) 1

Net accrued (prepaid) benefit cost (170) 5

Assumptions as of 31 December, see note 7 in the consolidated financial statements for the Group

Components of net periodic benefits costs

Service cost 29 19

Interest cost 24 6

Expected return on plan assets (20) (5)

Amortization of prior service costs 13 -

Amortization of actuarial gains and losses 4 1

Social security tax 6 3

Net periodic benefit costs 56 24

Contribution plan costs 2 -

Total pension costs charged to the year's result 58 24

1) The substantial part of unrecognised prior service costs and net actuarial losses arose from transferring employees from other

Telenor companies in the years 2002 and 2001 . The change in scheme (unrecognised prior service costs) is related to implementation

of the early retirement scheme (AFP scheme) as of 1 January 1 997 for wholly owned subsidiaries. The implementation effect is

expensed over the estimated remaining service period. Change in scheme that is not expensed as of 31 December 2002 amounted to

NOK 1 31 million. This amount is included in financial assets, see note 8 below.


4. OTHER OPERATING EXPENSES


Cost of premises, vehicles, office equipment etc. 56 13 -

Operation and maintenance 47 14 -

Travel and travel allowances 38 24 -

Marketing, representation and sales commission 33 17 -

Consultancy fees and rent of personnel 326 276 -

Workforce reductions 27 - -

Bad debt 18 - -

Other 126 37 24

Total other operating expenses 671 381 24

Of which internal within Group companies 195 152 -

5. LOSSES ON DISPOSAL OF OPERATIONS

Losses on disposal of operations in 2002 were mainly related to the simultaneous liquidation of Nye Telenor Communications IAS, and Digifone Holding AS, see note 7 below.

In connection with the liquidations a deferred tax asset arose, recorded as tax income, which more than compensated for theliquidation loss.

6. FINANCIAL INCOME AND EXPENSES


Interest income from Group companies 3,614 1,301 78

Group contribution from Group companies1) (66) 16,336 5,487

Total financial income 3,548 17,637 5,565

Interest expenses external (923) - -

Other financial expenses (8) - -

Interest expenses to Group companies (661) - -

Write-downs2) (5,863) (11,705) -

Total financial expenses (7,455) (11,705) -

Net foreign gains 457 - -

Net gains (losses) on financial assets (44) 22 -

Total Financial income and expenses (3,494) 5,954 5,565

1) Negative Group contribution 2002 is a correction of received Group contribution 2001 . 2) Write-downs of the values of Telenor ASAs investments in subsidiaries have been performed to better reflect the values in the con-

solidated accounts. Group contribution distributed (net after taxes) has initially increased the book values of subsidiaries. The book

values have been written down in 2001 as the Group contributions in 2001 and 2000 are distributed to cover losses in the relevant

subsidiaries.

7. TAXES


Profit before taxes in Norway (5,276) 10,847 5,533

Current taxes in Norway 3 4,941 1,549

Deferred taxes in Norway (2,653) 6 -

Total income tax expense (income) (2,650) 4,947 1,549


Effective tax rate

Expected income taxes according to statutory tax rate (28 %) (1,477) 3,037 1,549

Non-taxable income - (1,368) -

Non-deductable expenses 1,667 3,278 -

Liquidation of Nye Telenor Communications I AS (2,843) - -

Insufficient taxes calculated earlier years 3 - -

Tax expense (income) (2,650) 4,947 1,549

Effective tax rate in % N/A 45.6% 28%


Deferred taxes

Assets Liabilities Assets Liabilities

(in NOK millions) 2002 2002 2001 2001

Long-term assets 14 (3) - (5)

Current assets - - - (1)

Long-term liabilities - (678) 5 -

Short-term liabilities 10 - - -

Tax losses carried forward 2,922 - - -

Deferred taxes 2,946 (681) 5 (6)

Valuation allowances - - - -

Net deferred taxes 2,265 - - (1)

In 2002, operations were transferred to Telenor ASA with a deferred tax liability in the balance sheet in the amount of NOK388 million. This was mainly related to unrealized exchange gains on long-term liabilities in Telenor Finans. In 2002 a tax lossof approximately NOK 11.5 billion corresponding to a deferred tax asset of approximately NOK 3.2 billion, was realized in con-nection with the liquidation of Nye Telenor Communication I AS and Digifone Holding AS, see note 13 to the consolidatedfinancial statements. In 2002 an accounting loss before taxes on the same shares of NOK 1.3 billions also was realized. In2002, no Group contributions have been provided to Telenor ASA to cover the tax loss, as taxable income in subsidiaries in thetax Group in Norway have been utilized to cover tax losses in other subsidiaries in the tax Group. It is expected that Group con-tributions in future years will entail utilization of tax losses carried forward in Telenor ASA, and is therefore reported as adeferred tax asset in the financial statements for 2002. Tax losses carried forward as of 31 December 2002, was NOK 10,437million, and expire in ten years.

In 2001, income of NOK 4,885 million was not taxable, mainly related to the gain on the sale of Telenor Media. No deferred taxasset was calculated on the write-downs of investments in subsidiaries in 2002 and 2001. The current taxes in the balancesheet for 2001 and 2000 were reduced with taxes on Group contribution distributed.

8. FINANCIAL ASSETS


Shares in subsidiaries1) 15,714 18,584

Receivables on associated companies 440 -

Interest bearing receivables on Group companies1) 69,079 -

Other long-term shares and other investments 90 13

Changes in pension plan scheme 131 -

Net plan assets 39 -

Other receivables 2 109

Total financial assets 85,495 18,706

1) See note 1 2.2) Interest bearing receivables on Group companies are loans from Telenor Finans.

9. INTEREST-BEARING LIABILITIES


Short-term interest-bearing liabilities to Group companies 24,499 -

Drawing on Group bank account 1,081 -

Other short-term interest-bearing liabilities 3 -

Total short-term interest-bearing liabilities 25,583 -

Long-term interest-bearing liabilities 21,470 -

Total interest-bearing liabilities 47,053 -

Long-term interest bearing liabilities are external. See note 20 to the consolidated financial statements.


10. SHORT-TERM NON-INTEREST-BEARING LIABILITIES


Accounts payable 10 14

Government taxes, tax deductions etc. 45 32

Dividends payable 799 621

Accrued expenses 540 41

Current taxes - 1,301

Liabilities to Group companies 160 995

Group contribution 190 13,005

Other liabilities 177 141

Total short-term non-interest-bearing liabilities 1,921 16,150

11. GUARANTEE LIABILITIES

in NOK millions 2002 2001

Guarantee liabilities 6,934 1,871

The table does not include purchased bank guarantees or guarantees where the corresponding liabilities are recorded in thecompany’s balance sheet. The increases in the gurarantee liabilities exceeding new guarantees in 2002 is due to transfer ofactivities from subsidiaries to Telenor ASA. Reference is made to note 23 in the consolidated financial statements for theGroup regarding guarantee liabilities for Bravida with NOK 515 million, Intelsat with NOK 815 million and the termination fee forthe Cross Border Tax Benefit Lease of NOK 174 million and a guarantee towards Telenor Pensjonskasse of NOK 165 million.Telenor ASA has provided guarantees for NOK 2.458 million in 2002 in connection with a tax claim, see note 13 to the consoli-dated financial statements for the Group. Telenor ASA has submitted guarantees of NOK 1,420 million for the satellite-leasesThor II and Thor III, including termination fees of NOK 171 million. The leasing agreements end in 2008 and 2010. The leasingliability as of 31 December 2002 recorded in subsidiaries was NOK 1,114 million. Telenor ASA has submitted guarantees, limitedup to NOK 968 million for financial leasing liabilities of NOK 550 million in Canal Digital. These leasing agreements end in theperiod of 2003 – 2007. In 2000, a fulfillment guarantee for deliveries between subsidiaries of NOK 333 million was provided.The guarantee ends in 2007. Furthermore, fulfillment guarantees of approximately NOK 90 million for deliveries and pay-ments by subsidiaries to external parties have been provided.

12. SHARES IN SUBSIDIARIES

The table below sets forth Telenor ASA’ ownership interest in its subsidiaries. These subsidiaries will mainly be holding compa-nies and their directly owned subsidiaries. Several of the subsidiaries named in the second part, own shares in other sub-sidiaries as described in their respective annual reports.

Share Book

(in NOK thousands) Office owned in % value

Telenor Networks Holding AS Norway 100.0 1,268,207

Telenor International Centre AS Norway 100.0 100

Telenor Management Partner AS Norway 100.0 20,000

Telenor Intercom Holding AS Norway 100.0 1,278,992

Telenor Key Partner AS Norway 100.0 19,000

Telenor Communication II AS Norway 100.0 124,000

Telenor Satellite Mobile Holding AS Norway 100.0 262,086

Telenor Mobile Holding AS Norway 100.0 7,352,200

Telenor Satellite Networks Holding AS Norway 100.0 246,579

Itworks Holding AS Norway 100.0 -

Telenor Installasjon Holding AS Norway 100.0 85,767

Telenor Business Solutions Holding AS Norway 100.0 -

Dansk Mobil Holding II AS Norway 100.0 -

Telenor Inma Holding AS Norway 100.0 110

Telenor Business Partner Invest AS Norway 100.0 870,000

Telenor Teleservice Holding AS Norway 100.0 27,452

Telenor Plus Holding AS Norway 100.0 -

Telenor Eiendom Holding AS Norway 100.0 4,159,523

Telenor KB AS Norway 100.0 100

Telenor Struktur II AS Norway 100.0 120

TOTAL 15,714,236


Shares in subsidiaries owned through subsidiaries

Share

Office owned in %

Telenor Networks Holding AS

Telefonselskapet AS Norway 100.0

Telenor Global Services AS Norway 100.0

Telenor Svalbard AS Norway 100.0

Telenor Privat AS Norway 100.0

Telenor Telecom Solutions AS Norway 100.0

Telenor International Centre AS

Telenor Magyarorszag KFT Hungary 99.3

Telenor Russia AS Norway 100.0

Telenor Bruxelles SA Belgium 100.0

Telenor Intercom Holding AS

Nye Telenor Mobile Communications AS Norway 100.0

Telenor Communication II AS

Authorization Centre Slovakia j.s.c Slovakia 59.3

Digitania RT Hungary 99.99

Digitania Czech Republic a.s. Czech 100.0

TN Satellite Services AB Sweden 100.0

Argos Maroc S.A Morocco 99.9

CIMECOM S.A. Morocco 99.7

TTYL AS Norway 100.0

Telenor Venture III AS Norway 100.0

Telenor Forsikring AS Norway 100.0

Telenor Venture II ASA Norway 50.1

Telenor Venture AS Norway 63.7

Telenor Kapitalforvaltning ASA Norway 100.0

Telenor Irland AB Sweden 100.0

Gintel AS Norway 60.0

Telenor Satellite Mobile Holding AS

Telenor Satellite Services AS Norway 100.0

Telenor Mobil Holding AS

Nye Telenor Satellite Mobile I AS Norway 100.0

Nye Telenor Mobile Communications III AS Norway 100.0

Telenor Mobile Communications AS Norway 100.0

Telenor East Invest AS Norway 100.0

Telenor Mobile Sverige AS Norway 100.0

Telenor Greece AS Norway 100.0

Nye Telenor Mobile Communications II AS Norway 100.0

Telenor Mobil AS Norway 100.0

Wireless Mobile International AS Norway 100.0

Telenor Mobile USA AS Norway 100.0

Telenor Satellite Networks Holding AS

Telenor Satellite Networks AS Norway 100.0

Telenor Satellite Networks II AS Norway 100.0

Telenor Satellite Networks Holding II AS Norway 100.0

Telenor Business Solutions Holding AS

Telenor Business Solutions AS Norway 31.7

Telenor Bedrift AS Norway 100.0

Nextra Russia Invest AS Norway 100.0

IT Drift AS Norway 99.8

Edisys AS Norway 51.0

Telenor Link Holding AS Norway 100.0


Share

Office owned in %

TBS Infrastructure AB Sweden 100.0

Nye Telenor East Invest AS Norway 100.0

Infonet Telecom AS Norway 80.0

Nextra Active AS Norway 100.0

Nextra Messaging AS Norway 100.0

Dansk Mobil Holding II AS

Dansk Mobil Holding AS Norway 100.0

Telenor Inma Holding AS

Telenor Inma AS Norway 100.0

Telenor Business Partner Invest AS

EDB Business Partner ASA Norway 51.8

Telenor Teleservice Holding AS

Kalix Tele 24 AB Sweden 100.0

Telenor Teleservice AS Norway 100.0

Telenor Plus Holding AS

Telenor UK Ltd. Great Britain 100.0

Telenor Bulgaria o.o.d. Bulgaria 100.0

Telenor Satellite Broadcasting AS Norway 100.0

Telenor Plus AB Sweden 100.0

Canal Digital AS Norway 100.0

Nordic Satellite Distribution AS Norway 100.0

Telenor Avidi AS Norway 100.0

Telenor CTV AS Norway 100.0

Norkring AS Norway 100.0

Telenor Vision International AB Sweden 100.0

Telenor Satellite Services 2 AS Norway 100.0

Pecheur AS Norway 100.0

ICanal AS Norway 100.0

ABC Startsiden AS Norway 83.3

Conax AS Norway 90.0

Salsamedia AS Norway 85.0

Telenor Internett AS Norway 100.0

Telenor Online AS Norway 100.0

Frisurf AS Norway 100.0

Telenor Direkte AS Norway 100.0

Nordic Satelllite Broadcasting S.A. Luxembourg 100.0

Telenor Eiendom Holding AS

Telenor Eiendom Fornebu AS Norway 100.0

Telenor Eiendom Fornebu Kvartal 2 AS Norway 100.0



Telenor Eiendom Drift AS Norway 100.0

Telenor Eiendom Fornebu Fjordpark Syd AS Norway 100.0

Telenor Eiendom Fornebu Fjordpark Nord AS Norway 100.0

Telenor Eiendom Midt-Norge AS Norway 100.0

Telenor Eiendom Hareløkken AS Norway 100.0

Telenor Eiendom Sør AS Norway 100.0

Telenor Eiendom Vest AS Norway 100.0

Telenor Hellas SA Greece 99.0

Telenor Business Solutions AS Norway 68.3


AUDITOR’S REPORT FOR 2002

To the Annual Shareholders' Meeting ofTelenor ASA

Auditor's report for 2002

We have audited the annual financial statements of Telenor ASA as of 31 December 2002, showing a loss of NOK 2,626 millionfor the parent company and a loss of NOK 4,656 million for the Group. We have also audited the information in the Directors'report concerning the financial statements, the going concern assumption, and the proposal for the coverage of loss. Thefinancial statements comprise the balance sheet, the statements of income and cash flows, the accompanying notes and theconsolidated accounts. These financial statements are the responsibility of the Company’s Board of Directors and Chief Execu-tive Officer. Our responsibility is to express an opinion on these financial statements and on other information according to therequirements of the Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and auditing standards and practicesgenerally accepted in Norway. Those standards and practices require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial state-ment presentation. To the extent required by law and auditing standards, an audit also comprises a review of the managementof the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a rea-sonable basis for our opinion.

In our opinion,•the financial statements, included on pages 72–130, have been prepared in accordance with law and regulations and present

the financial position of the Company and of the Group as of 31 December 2002, and the results of its operations and its cashflows for the year then ended, in accordance with accounting standards, principles and practices generally accepted In Nor-way

•the Company's management has fulfilled its duty to properly register and document the accounting information as requiredby law and accounting standards, principles and practices generally accepted in Norway

•the information in the Directors’ report, included on pages 10–17, concerning the financial statements, the going concernassumption, and the proposal for the appropriation of the loss is consistent with the financial statements and comply with lawand regulations.

Oslo, March 19, 2003

ERNST & YOUNG AS

Olve Gravråk (sign.)State Authorised Public Accountant (Norway)

Note: The translation to English has been prepared for information purposes only.

STATEMENT FROM THE CORPORATE ASSEMBLY OF TELENOR

The Corporate Assembly of Telenor ASA decided 27 March 2003 the following:

The Corporate Assembly recommends that the General Meeting approves the Board of Directors proposed profit and loss

statement and balance sheet for Telenor ASA and for the Group for 2002, and recommended that the General Meeting

approves the suggested appropriation of the net loss for the year 2002.


Shareholder information is a central part of Telenor’scommunication with its owners. Telenor shares wereamong the most actively traded on the Oslo StockExchange in 2002, and performed better than relevantindustry indexes. For further information on Telenorshares please visit our website at www.telenor.com/ir

134 telenor asa annual report 2002

Telenor is committed to building a close and trusting relation-ship with its shareholders. Comprehensive information througha number of channels shall ensure that the stock market is keptinformed of important developments in the group.

SHAREHOLDER POLICY

Telenor ASA’s long-term primary objective is to give share-holders a return on their investment that is at least equal toalternative investments with a corresponding risk profile. Thereturn shall be made in the form of a cash dividend in additionto the added value of the share. The Telenor share shall appearas a liquid and attractive investment opportunity.

OWNERSHIP STRUCTURE

Telenor had 55,840 shareholders at the end of 2002. Of these,54,180 were private individuals. Non-Norwegian investorsowned approximately 9.4% of the total stock. The NorwegianState, through the Ministry of Trade and Industry, is the largestindividual owner with 77.6% of the shares.

AUTHORISATION TO ISSUE NEW SHARES

Until the Annual General Meeting in 2003, the Board of Direc-tors has the authority to increase the share capital by up toNOK 1,064,776,488, divided between a maximum of177,462,748 shares. The Board can determine whether theshareholders’ priority for the share subscriptions may be devi-ated from. From these shares, 695,520 new shares were issuedas part of the implementation of the Share Programme foremployees in December 2002.

SHARE PROGRAMME FOR EMPLOYEES

To encourage long-term shareholding among Telenoremployees, all permanent employees in Telenor ASA and Nor-wegian subsidiaries where Telenor ASA’s ownership sharedirectly or indirectly is greater than 90%, were given theopportunity to buy shares for up to NOK 7,500, with a 20%

cash discount. Where the average share price in the last 30days of trade, up to and including 16 December 2002 (shareprice NOK 31.16), is at least 12% higher than a correspondingaverage price up to and including 16 December 2002 (NOK27.82), those who subscribed for shares in this offer will beallocated “profit bonus shares” for NOK 2,500, provided thatthey still hold the allocated shares and are still employees ofTelenor.

Around 22% of the employees who were offered shares tookadvantage of the offer. They were allocated 276 shares eachat a price of NOK 27.08, which was the average quoted priceduring the last five days of trade up to and including 16 Decem-ber 2002. After taking account of the discount, the effectiveprice is NOK 21.65.

SHARE CAPITAL AND OWN SHARES

As of 31 December 2002 Telenor ASA had a share capital ofNOK 10.8 billion, divided into 1,803,426,172 shares, each witha nominal value of NOK 6. The company holds 28,103,172shares. As part of the stock dividend issue decided at theShareholders’ meeting of 10 November 2000, the companyreceived 30 million shares to be allocated as bonus shares toprivate individuals who bought shares in connection with thestock exchange introduction in December 2000. 1,896,828bonus shares were allocated on 4 December 2001 to those pri-vate individuals who still held the shares they were allocatedat the time of the stock exchange introduction, with one bonusshare for every tenth share held. At the Shareholders’ meetingin May 2001, the company was authorised to dispose of anyexcess shares in a manner to be decided by the Board.

SHAREHOLDER INFORMATION

Breakdown of shares per shareholder as of 31 December 2002

Number of Percentage of all Number of Percentage of

Interval shareholders shareholders shares share capital

1–1,000 49,673 89.0% 19,530,074 1.1%

1,001–100,000 5,893 10.6% 31,760,311 1.8%

100,001–1,000,000 199 0.4% 67,306,306 3.7%

1,000,001–10,000,000 71 0.1% 190,690,232 10.6%

10,000,001–1,400,000,000 4 0.0% 1,494,139,249 82.9%

Total 55,840 100.00% 1,803,426,172 100.00%

telenor asa annual report 2002 135

DIVIDENDS

It is Telenor ASA’s policy to pay a share of the year’s profits asdividend to the shareholders. Telenor’s aim is to share out anannual dividend corresponding to 20-30% of the net incomeafter tax and minority interests, with adjustments being madefor any non-recurring gains and losses. The amount of the div-idend can however vary from year to year.

The Board of Directors proposes that a dividend of NOK 0.45per share be paid out for 2002. The dividend approved at theShareholders' meeting will be paid on 23 May 2003 to theshareholders on the date of the Shareholders' meeting. Theshares will be listed on the Oslo Stock Exchange exclusive ofdividends, from 9 Friday May 2003.

SHARE PRICE PERFORMANCE

At the start of 2001, the Telenor share was quoted at NOK38.50. The highest price during the year was NOK 39.30, andthe lowest was NOK 22.50. At the end of the year, the price wasNOK 26.50. At the end of the year, the price quoted on Nasdaqwas USD 11.020. The market value as of 31 December 2002was NOK 47.8 billion, which makes Telenor ASA the thirdlargest company quoted on the Oslo Stock Exchange.

TRADE

The Telenor share is listed on the Oslo Stock Exchange underthe ticker code TEL. The share is also listed the Nasdaq in theUS under the ticker code TELN, where it trades throughTelenor's ADR programme. One ADR share corresponds tothree Norwegian shares. The depot bank is Morgan GuarantyTrust Company of New York.

In 2002, 691 million Telenor shares at a total value of NOK 20.8billion were traded on the Oslo Stock Exchange. The averagetrading volume for Telenor shares on the Oslo Stock Exchangefor the year was 2.8 million shares per day of trading. A round lotfor the Telenor share on the Oslo Stock Exchange is 200 shares.

VOTING RIGHTS AND OWNERSHIP

Telenor has one class of shares and each share carries onevote. The company does not have any ownership restrictionsbeyond those that are stipulated in the Norwegian concessionlaws. The Norwegian Public Limited Companies Act regulatesthe exercising of shareholder rights. Pursuant to Norwegian

law, only shares registered in the owner's name can be used forvoting. Voting rights can be exercised no earlier than twoweeks after shareholding has been reported to the NorwegianCentral Securities Depository (VPS).

INFORMATION TO THE STOCK MARKET

Contact with the Norwegian and international stock marketshas high priority in Telenor, and the company wishes to have anopen dialogue with its shareholders and other players in thestock market. The objective is for the financial markets at anygiven time to have sufficient information on the company inorder to form the basis for an accurate share valuation. Infor-mation that may be important to shareholders and other play-ers in the Norwegian and international markets is provided inthe form of notices to the Oslo Stock Exchange and throughpress releases. Telenor presents its results at its headquarter atFornebu outside Oslo every quarter. In addition, regular meet-ings are held with investors in Europe and the US. Leadingstockbrokers in Norway and abroad follow Telenor’s progress.

RISK ADJUSTMENT

In accordance with Norwegian tax regulations, shareholderswho are subject to taxation in Norway must make a downwardor upward adjustment of the cost price of the shares with a“RISK” amount (adjustment of original cost of shares by taxedprofits), when calculating sales gains. The RISK amount is cal-culated annually based on the change in Telenor’s retained,assessed capital, divided by the number of issued Telenorshares. The RISK amount for 2001 was NOK 5.39 per share, andthe preliminary corresponding figure for 2002 has been cal-culated at NOK -0,56 per share. The final RISK amount for2002 will be available from 1 January 2004. Shareholders whoare not subject to taxation in Norway are not affected by theNorwegian RISK regulations.

RATING

In March 2003 Telenor was rated by Moody’s at A2/P1 for longand short-term financing respectively. In March 2003 Telenorwas rated by Standard & Poor’s at A-/A2 for correspondinglong and short-term financing.

More – continuously updated – information on shareholder-related matters may be found on the Telenor IR web site:www.telenor.com/ir

30.12.0203.06.0202.01.02

40

60

80

100

40

60

80

100

Telenor Index

Share price performance in NOK Telenor, compared with the developmentof the Dow Jones European Index in 2002

136 telenor asa annual report 2002

20 major external shareholders as of 31 December 2002

Nominee Number of Ownership in percentages

Names of shareholders Account shareholders 31.12.02 31.12.02

Ministry of Trade and Industry 1,400,000,000 77.63%

National Insurance Scheme Fund 44,524,000 2.47%

Telenor ASA 28,103,172 1.56%

State Street Bank * 21,512,077 1.19%

Phildrew Nominees * 9,908,011 0.55%

Royal Trust Corporation * 8,881,728 0.49%

Vital forsikring ASA v/DnB Asset Management 8,625,800 0.48%

JP Morgan Chase Bank * 7,151,777 0.40%

JP Morgan Chase Bank * 5,785,952 0.32%

UBS 5,394,501 0.30%

DnB Norge 4,839,700 0.27%

State Street Bank * 4,710,690 0.26%

Clearstream Banking * 4,605,278 0.26%

KAS Depositary Trust Company * 4,474,791 0.25%

The Northern Trust * 4,382,584 0.24%

Gjensidige NOR 4,228,225 0.23%

Skandinaviska Enskilda Banken * 4,220,000 0.23%

Deutsche Bank 4,172,348 0.23%

Storebrand Livsforsikring AS 4,114,300 0.23%

Euroclear Bank * 3,887,773 0.22%

Sum 1,583,522,707 87.81%

Sum other 219,903,465 12.19%

Total number of shares 1,803,426,172 100.00%

Total number of shareholders (31.12.02) 55,840

FINANCIAL CALENDAR 2003

7 May Results first quarter 20037 May Telenor ASA – Capital Markets Day8 May AGM23 July Results second quarter 200330 October Results third quarter 2003

This report contains statements regarding the future prospects of Telenor, involving growth initiatives, profit figures,

strategies and objectives. The risks and uncertainties inherent in all statements regarding the future can lead to actual

profits and developments deviating substantially from what has been expressed or implied. The risk factors associated

with Telenor’s business activities are also described in form 20-F, which has been submitted to the Securities and

Exchange Commission. (Available on: www.telenor.com/ir/annual_reports)

CORPORATE ASSEMBLY


Chairman: Mona Røkke, TønsbergVice-chairman: Gisle Handeland, FedjeBjørg Simonsen, AndfiskåBrit Seim Jahre, OsloEystein Gjelsvik, LanghusHilde Kinserdal, BergenJan Erik Korssjøen, KongsbergRandi Braathe, RyggeRagnar Klevaas, SandvikaOve Andersen, Kolbjørnsvik

Alternate elected by the employees

Inger-Grethe Solstad, Stavanger


Berit Kopren, StavangerJan Riddervold, LillehammerAstri Skare, BergenStein Erik Olsen, FlaktveitArne Jenssen, Trondheim


Erling Hjertnes, BergenEsther M. Strømme, OsloFrancisco M. Rasmijn, NesoddtangenRagnhild Holm, Bardu

Observers for the employees

Grethe Elin Henriksen, OsloBrit Østby Fredriksen, Drøbak

BOARD OF DIRECTORS


Board chairman: Thorleif Enger, OsloVice-chairman: Åshild M. Bendiktsen, SjøveganHanne de Mora, SwitzerlandEinar Førde, OsloJørgen Lindegaard, CopenhagenBjørg Ven, Oslo


Harald Stavn, KongsbergPer Gunnar Salomonsen, SkienIrma Tystad, Trysil


Ragnhild Laura Hundere, SelMarianne Losnegaard Jensen, OsloRagnhild Broen, TrondheimRoger Rønning, EidskogHelge Enger, KongsvingerHjørdis Henriksen, Sortland

GROUP MANAGEMENT

President and Chief Executive Officer:

Jon Fredrik BaksaasSenior Executive Vice President

and CEO of Telenor Mobile:

Arve JohansenSenior Executive Vice President

and Chief Financial Officer:

Torstein MolandExecutive Vice President

and CEO of Telenor Broadcast:

Stig Eide SivertsenExecutive Vice President

and CEO of Telenor Networks:

Jan Edvard ThygesenExecutive Vice President

and CEO of Telenor Norge:

Morten Karlsen SørbyExecutive Vice President

and Chief Technical Officer:

Berit Svendsen

ELECTED OFFICERS AND MANAGEMENT

GLOSSARY AND DEFINITION OF TERMS

ADR program: American Depositary Receipts pro-gram; an ADR program is characterized by a companysigning an agreement with a bank for the depositing ofthe company’s shares in the bank. In the USA, it is ADRsecurities that are traded, not shares.

ADSL: Asymmetrical Digital Subscriber Line; methodof transmission that uses existing copper cable net-works for services that require a higher capacity in onedirection than the other, e.g. video on demand.

AMPS: Advance Mobile Phone Service; the originalstandard specification for analog mobile networks,AMPS divides a geographic area into cells in order tooptimize the use of a limited number of frequencies.

Analog: term for radio transmission where the radiowaves vary continuously in synchronization with thevoice.

ARPU: Average Revenue Per User; average revenue aservice provider has per GSM subscription.

ASP: Application Service Provider; manage and dis-tribute software over networks from a central location.

Broadband: transmission capacity with sufficientbroadband to transmit, for example, voice, data andvideo simultaneously.

CPA: Content Provider Access; enables contentproviders to charge users for content services sup-plied to them via a mobile operator’s customers, wherethe mobile operator handles all end-user invoicing.

D-AMPS: Digital Advanced Mobile Phone Service (alsoknown as the IS-136 TDMA standard); a further devel-opment of the AMPS standard, comparable to GSM.

Digital: term for radio transmission where the voicesignal is measured at regular intervals, and wherethese measured values are transmitted by the radiosignal as numerical values (0 and 1).

EBITDA: Earnings before interest, taxes, depreciationsand amortization.

GPRS: General Packet Radio Services; packet switchservice that transfers data as packets, each with itsown address.

GSM: Global System for Mobile communications; com-mon European standard for digital mobile telephonesystems.

ICT: Information and Communications Technology.

IP: Internet Protocol; the protocol (standard) that theInternet is based on.

ISDN: Integrated Services Digital Network; term for

digital networks that integrate a number of differentservices – voice, text, data and images.

MMS: Multimedia Messaging Service; a standard thatenables the transfer of formatted text, and live pic-tures and sound, to and from mobile telephones.

MVNO: Mobile Virtual Network Operators; are mobileoperators without physical network infrastructure,possessing all systems necessary to provide combinedservices and roaming to other network operators. Mayoffer subscriptions (SIM-cards) and services to end-users.

NMT: Nordic Mobile Telephone; standard for the ana-log mobile telephone system developed in the Nordicregion.

PKI: Public Key Infrastructure; is a standardisedsystem for electronic signatures and identification foruse with Internet and content services via the mobilephone and digital TV. PKI will be an important factor inthe development of electronic trade as well as publicservices to both private individuals and businesses.

PSTN: Public Switched Telephone Network; term forthe normal, analog telecoms network.

RISK: adjustment of original cost of shares by taxedprofits. The taxable cost price on the purchase ofshares is adjusted with retained and taxed profit in thecompany. This is used to avoid double taxation on theadded value.

SIM card: Subscriber Identity Module card; a smallprinted circuit board that needs to be installed in aGSM terminal before use. The card contains subscrip-tion details, security information and a memory for apersonal telephone number register.

SMATV: Satellite Master Antenna Television; jointantenna installations.

SMS: Short Messaging Service; the text messagesystem in GSM.

UMTS: Universal Mobile Telecommunications System;term for the third generation mobile network.

US GAAP: United States Generally AcceptedAccounting Principles

VPN: Virtual Private Network; service for corporatecommunication where geographically spread organi-zations with private exchanges and Centrex solutionsare linked together in one corporate network viaswitched connections in the public telecoms network.

WLAN: Wireless Local Area Network; a LAN (LocalArea Network) that is linked by means of wirelesstechnology.

Design and production: Gazette R Photo: Morten Krogvold, Linda Cartridge, Bo Mathiesen R Print: RK Grafisk

Annual reports on the Web

Telenor’s annual reports since 1994

have been published on the company’s

website:

www.telenor.com/ir/annual_reports

Social report on the Web

Telenor’s social report for 2002 is

available on the Internet along with

previous social reports:

www.telenor.com/ir/annual_reports

“Telenor will emerge from the challenges of 2003 as a

less complex company, simplifying the workday of our

customers.”

Jon Fredrik Baksaas, President and CEO of Telenor

For news and investor information please visit our website: www.telenor.com

Annual Report 2002 R Published by: Telenor ASA R N-1331 Fornebu, Norway R Switchboard: +47 67 89 00 00Investor Relations: Tel: + 47 67 89 24 70 R e-mail: [email protected]

Documents

documents Telenor’s strong position in the Norwegian ... · Notes to the financial statements – Telenor Group 80 Accounts – Telenor ASA 120 ... MMS: Multimedia Messaging Service;